Understanding the effect of rollback on annual allowance

Every Public Service Pension Scheme is working through significant complexity to put in place the Public Service Pensions Remedy for all affected members

As the largest Scheme, the NHS Pension Scheme has made substantial progress towards implementing the remedy so affected members can make their choice with confidence. However, the challenges facing all Schemes mean we need to update the timings for when this choice will be available, and when members can expect to receive their choice communications. We recognise that this means members are waiting longer than planned, and apologise for the delay.

If you’re affected by the Public Service Pension Remedy, sometimes known as the ‘McCloud remedy’, you’ll be asked if you would like to receive legacy scheme or reform scheme pension benefits for your membership between 1 April 2015 and 31 March 2022. This is called the remedy period.

Depending on when you retire, you’ll be asked to make this decision either when you claim your NHS pension benefits, or later. Read more on when you'll make your decision.

From 1 October 2023, any pensionable service you have during the remedy period will be placed in your legacy scheme. In the NHS, this is the 1995/2008 Scheme. This is called rollback.

What this means if you’re affected by annual allowance

If you have pensionable service in the remedy period that is rolled back, it may affect your pension tax position for one or more of the tax years in the remedy period.

Many members affected by rollback will not see any change to their pension tax position, but some may, particularly if they had an annual allowance charge for one or more of remedy period tax years.

The annual allowance is the maximum amount of tax-free growth your pension can grow by in a tax year. The standard annual allowance was £80,000 for 2015/16, £40,000 from 6 April 2016 until 5 April 2023 and £60,000 from 6 April 2023. You can find the annual allowance for earlier years on our annual allowance webpage.

HMRC consulted on the regulatory changes they’re making to the pension tax framework because of the McCloud remedy. You can read more about the changes in the ‘finding more information’ section of this webpage and we’ll continue to update this webpage as more information is known.

The HMRC Digital Service

HMRC is introducing a new digital service that will enable members who have new annual allowance charges, or changes to annual allowance charges as a result of rollback, to:

reassess any previous annual allowance charges during the remedy period tax years
make an application for a refund of any previously overpaid annual allowance charges for tax years 2019/20, 2020/21 and 2021/22
make an application to claim compensation for any previously overpaid annual allowance charges for tax years 2015/16 to 2018/19
pay any underpaid annual allowance charges for tax years 2019/20, 2020/21 and 2021/22
pay an annual allowance charge for 2022/23

The digital service will also apply to other tax charges such as lifetime allowance charges and unauthorised payments charges.

HMRC has confirmed that members affected by rollback and annual allowance will not need to resubmit a self-assessment tax return for any remedy period tax year or need to include an annual allowance charge on a tax return for tax year 2022/23.

We're recalculating the pension input amounts for members affected by rollback and annual allowance charges for each remedy period tax year, and 2022/23. Once this is complete, we’ll send members who are affected by rollback and annual allowance a ‘remediable pension savings statement’. You will need your remediable pension savings statement to be able to use the HMRC Digital Service.

When you'll receive your updated pension savings statements for the remedy period

If you’re a member who is affected by rollback and annual allowance, we’ll send you a remediable pension savings statement for the tax years in the remedy period.

You'll receive one updated statement that will include your recalculated pension input amount for the remedy period tax years, plus any carry forward tax years that apply.

This will allow you to use HMRC’s Digital Service. Read the HMRC Digital Service section of this webpage.

We’ll update this information once we know more on the timings for issuing these statements.

What to do if you've received a 2021/22 pension savings statement

If you’re a member who is affected by rollback and you have received a 2021/22 pension savings statement, you should report and pay any annual allowance charge within HMRC’s existing regulatory deadlines, as you may have done for previous tax years.

Once we have provided you with a remediable pension savings statement for the remedy period tax years, you will be able to use HMRC’s digital service to reassess any annual allowance you may have for this tax year.

Read the sections titled 'The HMRC Digital Service' and ‘When you'll receive your updated pension savings statements for the remedy period' on this webpage.

If you've not received a 2021/22 pension savings statement

Statements for 2021/22 were issued on or before 6 October 2023.

If you’re a member who is affected by rollback and you have not received a 2021/22 pension savings statement automatically, you can request a 2021/22 pension savings statement as normal and this will be sent to you within 3 months if we have the information needed to complete this, or within three months of the date that your employer provides this information to us. Your statement will be based on your service before rollback.

We will send you a remediable pension savings statement for the remedy period tax years, plus any carry forward tax years that apply that you will be able to use HMRC’s digital service to reassess any annual allowance you may have for this tax year.

Read the sections titled 'The HMRC Digital Service' and ‘When you'll receive your updated pension savings statements for the remedy period' on this webpage.

2022/23 pension savings statements for members not affected by rollback

If you're a member who is not affected by rollback, we're aiming to send 2022/23 pension savings statements on or before 6 October 2023.

An annual allowance charge for 2022/23 must be included on your self-assessment tax return.

2022/23 pension savings statements for members affected by rollback

We’ll provide 2022/23 pension savings statements to members affected by rollback after we've provided the remediable service pension savings statements for the remedy period. This is to make sure your pension input amount for the 2022/23 tax year is correctly calculated based on your pension benefits following rollback.

HMRC has confirmed that if your affected service for the remedy period has been rolled back you will not need to report any annual allowance charge for 2022/23 on your self-assessment tax return by the standard 31 January 2024 deadline, even if you receive a 2022/23 pension savings statement before this date. You’ll still need to submit a self-assessment form to report and pay any other tax charge you are liable for by 31 January 2024.

HMRC is considering whether affected members should include some wording on their 2022/23 self-assessment tax return. Once we have more information about this, we’ll update this webpage.

What this will mean for scheme pays deadlines for rolled back members

HMRC has extended the mandatory scheme pays deadline for 2022/23 for members who will not receive 2022/23 pension savings statements till after remediable service statements have been issued.

The amended mandatory scheme pays deadlines are:

active and deferred members (at 30 September 2023) the deadline will be extended from 31 July 2024 to 6 July 2025
pensioner members (at 30 September 2023) the deadline will be extended to 6 July 2027.

These deadlines also apply to any annual allowance charge you may have in tax years 2019/20, 2020/21 and 2021/22 because of rollback and receiving a remediable service pension savings statement.

For members not affected by roll back, the normal tax deadlines apply. Read our annual allowance webpage for more information.

You can make an application to use scheme pays, known as a scheme pays election after these deadlines, and your election will be processed as voluntary scheme pays. There will be no deadlines on voluntary scheme pays requests for tax years 2019/20, 2020/21, 2021/22 and 2022/23.

You can find more information on the difference between mandatory and voluntary scheme pays on our annual allowance webpage.

If you're already retired

We’ll write to you when it’s time for you to make your decision about whether you’d like to receive 1995/2008 or 2015 Scheme benefits for your membership during the remedy period. Read more on when you'll make your decision.

We’ll provide you with information when we write to you to help you to make your choice decision. Everyone affected will be offered their choice and if you decide to change the benefits you’re receiving for the remedy period, we’ll backdate all payments to your date of retirement.

If when you make your choice and you decide to change your benefits and it may mean you might owe tax or be owed a refund for tax charges, we'll write to let you know. Not all members will need a remediable pension savings statement (RPSS) and we’ll only know if you need a statement once you have notified us of your choice decision.

If you’ve not received a pension savings statement for 2021/22 but think you may have an annual allowance charge, you can request a statement and should receive this within 3 months of the date of your request.

If you retired before 1 October 2023 and have received a pension savings statement for 2022/23, you should include any annual allowance charge for 2022/23 on your self-assessment tax return.

Finding more information

We’ll continue to update this webpage as more information becomes available.

Read more about HMRC’s consultations and changes to the pension tax framework:

The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2023 (S.I. 2023/113) came into force on 6 April 2023.

HMRC are now finalising The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) (No.2) Regulations 2023.

We’ll continue to update this webpage as more information is known on the Tax No.2 Regulations.