Pension Savings Statement explained
As a pensions administrator we will issue our clients with a copy of a Pension Savings Statement, normally once a year, for a specific tax year. On this page we provide some useful information to help you understand what a Pension Savings Statement is, why they are important and what is included in one.
What is a Pension Savings Statement?
This is a statement of the amount of pension savings made into a pension plan for a given tax year.
Why would a Pension Savings Statement be issued?
A statement would be issued if the pension savings or pension input amount in a pension input period (or PIP) are more than the annual allowance.
What is a Pension Input Period?
A pension input period is the period over which the amount of pension saving (pension input amount) under an arrangement is measured.
What is a Pension Input Amount?
The amount of pension savings made to your scheme during the pension input period ending in the relevant tax year is called the pension input amount.
What is the Annual Allowance?
The Annual Allowance is set by HM Revenue and Customs (HMRC). It is the maximum amount of pension savings (or pension contributions) you are allowed to receive tax relief on for each year. The Annual Allowance that applies for the tax year ending 5th April 2016 is £40,000.
Pension savings for 2015 to 2016 are split into two periods:
- the pre-alignment tax year (6 April 2015 to 8 July 2015) and
- the post-alignment tax year (9 July 2015 to 5 April 2016).
Each of these periods apply for annual allowance purposes only.
You have an annual allowance of £80,000 for the pre-alignment tax year, plus any unused annual allowance that you have carried forward from previous years (2012-13, 2013-14 and 2014-15).
For the post-alignment tax year, you do not have an annual allowance but can carry forward up to £40,000 of your unused annual allowance from the pre-alignment tax year, plus any unused annual allowance you can carry forward from previous years (2012-13, 2013-14, 2014-15).
Please note – if you haven’t been a member of a registered pension scheme during the pre-alignment tax year, you will have an annual allowance of £40,000 for the post-alignment tax year.
What is Money Purchase Annual Allowance?
Your annual allowance changes to the Money Purchase Annual Allowance if you flexibly access your pension pot.
In that situation, in the pre-alignment tax year you will have:
- a Money Purchase Annual Allowance of £20,000 and
- an alternative annual allowance of £60,000.
If you flexibly accessed your pension pot in the post-alignment tax year then for that period you will have:
- a Money Purchase Annual Allowance of £10,000 and
- an alternative annual allowance of up to £30,000.
What information is included on a Pension Saving Statement?
The following will be included:
- the total amount of pension inputs made to the scheme in the ‘pension input period’ ending in the relevant tax year
- the amount of the annual allowance for that tax year
- the total amount of the pension inputs made to the scheme for each of the pension input periods ending in the previous 3 tax years
- the amount of the annual allowance for the previous 3 tax years
- the date savings were first accessed for money purchase annual allowance purposes
- the amount paid into the scheme after savings accessed for money purchase annual allowance
- the amount of the money purchase annual allowance for that tax year.
Establishing if you have an Annual Allowance charge?
Where your contribution to your pension exceeds the Annual Allowance in the relevant tax year, there may be an Annual Allowance charge payable on the amount of excess over £40,000. It is your responsibility to find out if you have an Annual Allowance charge and the information contained in this statement should help you.
If you have pension savings in more than one registered pension scheme you need to add the pension contribution(s) in these schemes to the pension contribution in this statement in order to provide you with your total pension contribution.
You are able to carry forward any unused Annual Allowance from the previous three tax years up to the HMRC maximum for each year. This may help offset, in part or in full, any total pension contribution amount that exceeds the Annual Allowance for the tax year ending 5th April 2016.
To assist you, HMRC have published a pension savings Annual Allowance calculator to aid you in calculating your unused Annual Allowance and establishing whether you have an Annual Allowance charge at: www.hmrc.gov.uk/tools/pension-allowance
What is the tax rate of your Annual Allowance charge?
If you have established that you have to pay an Annual Allowance charge you must calculate the tax payable. The rate of tax is not a fixed rate but is calculated at the same marginal rate as your taxable income and is dependent on any other taxable income you have during the relevant tax year in which the Annual Allowance charge occurs.
Telling HMRC about your Annual Allowance charge
If you have an Annual Allowance charge it must be declared to HMRC by completing a Self-Assessment tax return. If necessary this can be obtained from HMRC by registering on their website at: www.hmrc.gov.uk/sa/register.htm
HMRC have published a help sheet – HS345 ‘Pensions savings – tax charges on any excess over the lifetime allowance and the annual allowance, and on unauthorised payments: HS345 Self Assessment helpsheet’ – to assist you when completing your tax return. It includes details of the ‘Amount of annual allowance and transitional rules for 2015 to 2016. This can be found using the following link to their website: www.hmrc.gov.uk/helpsheets/hs345.pdf
How would a tax charge be paid?
You are responsible for paying the Annual Allowance charge. This would normally be paid in line with your tax return.
We may be able to help if your pension contribution exceeds £40,000 and the Annual Allowance charge is more than £2,000 (the mandatory minimum set by HMRC), in respect of this pension scheme alone. You can make an election for the pension to pay all or part of the Annual Allowance charge on your behalf by completing the Scheme Pays Declaration available on request from Hornbuckle. Any declaration must be received by Hornbuckle by no later than 31 July 2017.
Where can you find out more information?
Information about your Pensions Savings Statement, the Annual Allowance and Scheme Pays can be found at: http://www.hmrc.gov.uk/pensionschemes/understanding-aa.htm
It is important to remember that Hornbuckle are unable to provide advice on personal tax circumstances. We recommend that you talk with your financial adviser if you have any uncertainty about your Pension Saving Statement.