Annual Allowance (NIFRS)

Background

There is a maximum amount of pension saving that you can build up in any one year before incurring a tax charge. This is known as the annual allowance (AA) and includes benefits built up in the NIFRS Pension Scheme as well as other pension savings. The annual allowance is set by HM Revenue and Customs (HMRC) and is currently £60,000. Your annual allowance may be tapered down to a lower limit from 6th April 2020 if you have a taxable income of more than £200,000, this increased to £260,000 from 6th April 2023. Your annual allowance may be lower if you have flexibility accessed any defined contribution pension provisions.

In the NIFRS Pension Scheme, the annual allowance is commonly worked out by the growth in your benefit in a particular year.

The limit for the tax year 2010/11 was £255,000.  This reduced to £50,000 a year from 6 April 2011.

Subsequently, from 6 April 2014 the AA reduced to £40,000 a year.

The vast majority of NIFRS Pension Scheme members will not be affected.  These changes will primarily affect high earners.  However, this can vary depending on the length of pensionable service and the rate of pensionable pay increase in any particular year.

If you exceed the annual allowance you will need to declare your pension savings amount on your tax return and may have to pay any excess at your marginal rate of income tax.

The AA is calculated as the growth in your benefits in a year. The AA limit covers all your pensions, except your state pension, therefore all other pension savings need to be added together.

Please also familiarise yourself on further changes made from years 2015/16 and 2016/2017.

Spring Budget Update 2023

Further to the Spring Budget in March 2023, the annual allowance limit increased from £40,000 to £60,000 from 6th April 2023.

In the event that you exceed the AA and are subject to a charge you may be eligible to opt for Scheme Pays. This is where a member elects for the relevant pension scheme to pay the charge on their behalf.  The NIFRS Pension Service will only pay the AA charge if the scheme receives a Scheme Pay election notification and the member meets the mandatory requirements prescribed by HMRC. Where a Scheme Pays election is made, the member’s benefits are reduced in line with factors provided by the scheme actuary.

The Guides below provide further information about AA statements, charges and the Scheme Pays option.

• Annual Allowance FAQ's

  These Frequently Asked Questions are spilt up into sections. They should be read in conjunction with the other materials provided on the HSC Pension Service website.

  1. General Questions

  Q. What is Annual Allowance?
  A. The Annual Allowance is the maximum amount of tax-free growth an Individual’s pension savings can grow by in any one year. If individuals exceed this limit they will need to pay an Annual Allowance tax charge to HMRC.

  Q. When was it changed?
  A. From the 6 April 2011 the annual allowance was reduced from £255,000 to £50,000. This was then reduced to £40,000 from 6 April 2014.
  Q. What is included in the Annual Allowance?
  A. The annual allowance limit covers all pension savings, except State Pensions, so any pension savings such as the NIFRS Pension Scheme and AVCs or personal pensions will need to be included.
  Q. How is the Annual Allowance worked out for my NIFRS contributions?
  A. For the main NIFRS Scheme it is the growth in benefits from one year to the next taking into account inflation (which is measured using the Consumer Price Index (CPI) method.

  Q. Can I work out what my annual pension growth has been from my NIFRS Pension Scheme contributions?
  A. No. In defined benefit schemes such as the NIFRS Pension Scheme the annual allowance is not based on the contributions that are paid into the Scheme, but is based on the growth in the value of the member’s benefits.
  Q. Does the Annual Allowance apply for me?
  A. For most members the annual allowance will not affect them. However, any of the following could impact on the growth of your pension savings:

  • Being a high earner with long pensionable membership;
  • Significant increase in membership (e.g. a change from part-time to full-time).
  • purchasing added years or additional pension
  • a significant pay rise, possibly due to a promotion.
  • Ill health retirement with an enhancement to you membership
  • Contributions paid to other pension savings arrangements, including ERRBOs.

  Q. Am I at risk of exceeding the annual allowance?
  A. The vast majority of members will not be affected. Early indications are that the changes will primarily affect high earners (those earning over £150,000 a year). You may also be affected if you earn less than £150,000 but:

  • you receive a significant pay rise or are promoted to a higher paid role; or
  • have a long period of pensionable service, or;
  • Earn pension at a higher rate than the normal Scheme accrual. Members on lower salaries can be affected if they receive a large one off increase in pensionable pay.The following may increase your chance of breaching the annual allowance limit:
  • Paying significant amounts of additional pension.
  • Paying significant amounts of pension contributions outside the NIFRS Pension Scheme.
  • Taking Tier 2 Ill Health retirement.

  However, in these circumstances, up to three previous years of unused ‘carry forward’ allowance may be used to reduce or offset the subsequent excess above the annual allowance.

  The table below gives an example of how this could impact NIFRS Pension Scheme members from 6 April 2011.

  The table shows which employees may be affected if pay increases by 5% and inflation is 3%.

  Different levels of pay increases and inflation can result in different people being affected.

  

  2. Questions regarding how the Annual Allowance is calculated?

  Q. How is the annual allowance calculated?
  A. In defined benefit schemes such as the NIFRS Pension Scheme the annual allowance is not based on the contributions that you pay into the Scheme, but is based on the growth in the value of your benefits. The growth in your benefits is measured over a “Pension Input Period” which is normally 1 April to the following 31 March in the NIFRS Pension Scheme.

  Q. What is a Pension Input Period?
  A. This is the 365 day period over which the growth in your pensions savings is assessed. The pension input period for the NIFRS Pension Scheme was 1 April to 31st March up to 2014/15. From 2015/16 the pension input period is 6th April to 5th April in line with the Tax Year.

  Q. What is a Pension Input Amount?
  A. This is the monetary amount your pension savings have grown by in the pension input period. For the NIFRS Pension Scheme this is based on the growth in your benefits. It is calculated by determining the difference between the value of your benefits at the start of the pension input period (the opening value) compared with the value at the end of the pension input period (the closing value).

  Q. What is included in the Pension Input Amount?
  A. The growth in your NIFRS Pension Scheme benefits including any doubled years, added years or additional pension being purchased.

  3. Informing you about the Annual Allowance

  Q. How will I know if I am over the Annual Allowance limit?
  A. If you are over the annual allowance limit then we will send you a Pension Savings Statement. If you do not receive a pensions saving statement (because the growth in your NIFRS benefits does not exceed the Annual Allowance) but you have more than one pension arrangement you may have to ask each pension provider (including NIFRS Pensions) for one.

  Q. When will you write to me?
  A. Provided all the relevant information is available to us from your Employer to calculate the pension input amount we will write to you by 6 October each year if you have exceeded the annual allowance.

  If we have not received all the information from your employer we will send you a pension saving statement within 3 months of receiving the information.

  Q. When will you send me a Pensions Savings Statement if I request one?
  A. Provided we have received all the relevant information from your employer to calculate the pension input amount we will write to you by 6 October or within 3 months of receiving your request (requests can only be accepted from 1 April following the relevant tax year).

  Q. What is a Pensions Savings Statement?
  A. It is HMRC’s name for the information that a pension scheme must send to members who are over the annual allowance or request annual allowance information.

  Q. Can I get information from NIFRS Pensions about the annual allowance even when I do not exceed the limit?
  A. Yes. Members will be able to request Pension Saving Statements from NIFRS Pensions on demand from 6th July 2013 (for tax years 2011/12 and 2012/13) if necessary. Remember you would only need these if you have other pension scheme membership and need to add them together to determine your overall position.

  Q. What about my contributions to other pension arrangements?
  A. Your total pension savings are subject to the annual allowance test so any contributions you are paying to other registered pension schemes will also need to be included when calculating how much your pension has grown by in any one year.

  Q. What is my responsibility in terms of disclosing my annual allowance position to HMRC?
  A. It is a member’s responsibility to ensure that any annual allowance tax charges are worked out, declared and paid in time. HM Revenue and Customs (HMRC) rules require that members who are over the Annual Allowance and who have tax to pay must do so via self-assessment or via the Scheme Pays process if they meet the criteria. For 2011/12 the self-assessment deadline for declaring and paying any tax due is 31 January 2013.

  The HM Revenue and Customs self-assessment process enables members to estimate any tax payable on their tax return. Members will then have 12 months in which to correct any estimated information provided. Members wishing to find out more should visit the HMRC website at: www.hmrc.gov.uk.

  4. Exemptions from the Annual Allowance Charges

  Q. I have a protection certificate from HMRC, does this affect my annual allowance?
  A. No. Enhanced, Primary or Fixed Protection will not protect you from potential annual allowance charges from 6 April 2011.

  Q. Are there any exclusions from potential annual allowance charges?
  A. Yes. If a member meets HMRC’s Severe Ill Health Condition (SIHC) or dies in year then HMRC deem that there is no Pension Input Amount (PIA) for that tax-year.

  Q. What is the Severe Ill Health Condition (SHIC)?
  A. This is where the member either:

  • becomes entitled to a serious ill-health lump sum, or
  • The Scheme Administrator receives evidence from a registered medical practitioner that the member is unlikely to be able to do any type of gainful work, other than in an insignificant way, before state pension age.

  Q. I am retiring on ill health grounds, how do I know if I will be affected?
  A. Members who retire on ill health grounds are not automatically excluded from annual allowance charges. If you are retiring on ill health grounds, you are more likely to be affected if you are eligible for ill health benefits which provide an enhancement to your pension and lump sum.

  This normally happens when you are awarded “Tier 2” ill health retirement benefits. Any growth in excess of the annual allowance may be partially or fully offset by the “carry forward” allowance.

  HMRC have stated that their “Severe Ill Health” Test must be met in order for an individual to be exempt from the annual allowance in the year that they retire on ill health grounds.

  The HMRC Severe Ill Health test is different, and in addition to the test members of the NIFRS Pension Scheme need to undergo in order to assess whether they qualify for ill health retirement benefits under the NIFRS Pension Scheme.

  As part of your ill health application you may be asked whether you consent to the additional HMRC test being undertaken. This test can help to establish whether or not you are exempt from any annual allowance charge in the tax year that you retire. However, if the test is undertaken you may still be subject to an annual allowance charge, depending on the outcome of the test.

  More information about the test can be found at: www.hmrc.gov.uk

  Q. What is Carry Forward?
  A. If you exceed the annual allowance in any one year you can ‘look back’ up to three previous tax years to see if you have any unused allowance from these years. If you do, you may be able to “carry forward” any unused allowance and add this to your allowance in the current year. This means that if your pension’s growth exceeds the £40,000 in any one year, say due to a promotion, you may not have any extra tax to pay, depending upon your personal circumstances.

  The maximum amount that can be carried forward is £40,000 for each of the 3 previous tax years, and is calculated on the current annual allowance rules. It is your responsibility to check whether you have an unused annual allowance from the preceding 3 tax years to carry forward to the tax year being assessed. The Pension Saving Statements provided by NIFRS Pension Service will include the pension input amounts for the previous 3 tax years.

  5. Scheme Pays

  Q. What is Scheme Pays?
  A. If you have asked your pension provider to pay your annual allowance charge this is known as “Scheme Pays”. NIFRS Pensions will provide the Scheme Pays facility. This can only be used when certain criteria are met. More information surrounding the criteria can be found in Scheme Pays Election Guide. In simple terms Scheme Pays can be thought of as following – In effect NIFRS Pension Service is loaning you money now to pay your current tax bill which it will receive back when you retire from your accumulated pension benefits.

  Q. I am considering Scheme Pays – what is an irrevocable election?
  A. It is your decision to opt for Scheme Pays. It means that your decision cannot be revoked or withdrawn at a later date, but it may be amended if the amount of the annual allowance charge changes.

  Q. When do I have to tell NIFRS Pensions I want to use Scheme Pays?
  Depending on the weather Scheme Pays is ‘Mandatory’ or ‘Voluntary’ the deadlines may vary.

  Q. When will the Scheme Pays amount be recovered?
  A. In the NIFRS Pension Scheme the amount will usually be recovered when your benefits are paid at retirement, or if you transfer out of this scheme.

  Q. How will it be recovered?
  A. By permanently reducing your pension and in the FPS Scheme, your lump sum as well.

  Q. How much will it cost me?
  A. The NIFRS Pensions Scheme will add interest to any Scheme Pays amount. Interest will be based on the CPI figure every September plus the Superannuation Contributions Adjusted for Past Experience (SCAPE) discount rate. SCAPE is variable and is currently 2.4%. This figure will be recovered from your award of benefits by factors or directly from any transfer amount.

  Q. What and when is the relevant date?
  A. The relevant date is the date from which interest is added to the amount of the Scheme Pays.

  Q. What happens if I die?
  A. If you die whilst a member of the NIFRS Pension Scheme, then any recovery due because of Scheme Pays will be written off and your estate will receive the same level of benefits as if you did not utilize Scheme Pays.

  Q. Will it affect my dependent’s benefits?
  A. In the NIFRS Pension Scheme your dependents benefits will be based on your pension before any recovery for Scheme Pays.

  Q. What happens if I exceed the annual allowance again?
  A. The process will be repeated for each occasion Scheme Pays is requested.

  6. Miscellaneous Questions

  Q. I am thinking of buying Additional Pension, how do I know if it will be affected?
  A. When Additional Pension is purchased; this increases a member’s pension beyond any normal increases. This is more likely to affect higher earners, especially if they also have longer service.

  If you are buying additional pension by lump sum of in excess of £2,500 pension then you are much more likely to be affected by the annual allowance.

  Q. What happens if I am made redundant?
  A. If you are being made redundant, you will not be affected if your Pensions’ growth is usually below the annual allowance unless you receive an enhancement to your pensionable service. Any growth in excess of the annual allowance may be partially or fully offset by “carry forward” allowance. Other redundancy payments which do not affect your pension or lump sum are not included in the annual allowance test.

  Q. Is my State Pension affected by annual allowance?
  A. The growth in your State Pension is not affected by the annual allowance limits.

   

• Exemptions from the Annual Allowance Charge

  NIFRS Pension Scheme – Exemptions from the Annual Allowance charge

  There are a number of circumstances from which you can be exempt from the Annual Allowance charge. These are set out in this factsheet.

  If a member:

  • meets HMRCs Severe Ill Health Condition (SIHC)
  • dies or
  • is a deferred member for the full pension input period

  during the relevant tax year then their pension input amount for that tax year will be nil. From 6 April 2011 having Enhanced Protection, Primary Protection, Fixed Protection 2012, Fixed Protection 2014 or Individual Protection will not protect a member from potential Annual Allowance charges.

  The Severe Ill Health Condition is where a member either:

  • becomes entitled to a serious ill health lump sum because their life expectancy is less than one year, or
  • NIFRS Pension Scheme receives evidence from a registered medical practitioner that the member is unlikely to be able to do any type of gainful work, other than in an insignificant way, before State Pension Age

  Members who retire on ill health grounds are not automatically excluded from Annual Allowance charges. If they retire on this basis they are more likely to be affected if they are eligible for benefits that provide an uplift to their pension and lump sum. This normally happens when they are awarded Tier 2 ill health retirement benefits.

  HMRC have stated that the severe ill health condition is different to the conditions required to receive Tier 2. As part of the ill health application the member will be asked to consent in order for the Schemes Medical Advisors to assess whether they meet the Severe Ill Health Condition.

  Exemption from Annual Allowance – FAQs

  Q. I have a protection certificate from HMRC; does this affect my Annual Allowance Charge?
  A. No. From 6 April 2011 having Enhanced Protection, Primary Protection, Fixed Protection 2012, Fixed Protection 2014 or Individual Protection will not protect you from potential annual allowance charges.

  Q. Are there any exclusions from potential Annual Allowance charges?
  A. Yes. If a member:

  • meets HMRC’s Severe Ill Health Condition (SIHC),
  • dies, or
  • is a deferred member (for the full pension input period) during the relevant tax year then their pension input amount for that tax year only will be nil.

  Q. I am retiring on ill health grounds, how do I know if I will be affected?
  A. Members who retire on ill health grounds are not automatically excluded from Annual Allowance charges. If you are retiring on ill health grounds, you are more likely to be affected if you are eligible for ill health benefits which provide uplift to your pension and lump sum.

  This normally happens when you are awarded “Tier 2” ill health retirement benefits.. HMRC have stated that their “Severe Ill Health” condition must be met in order for an individual to be exempt from the annual allowance in the tax year they retire on ill health grounds.

  HMRC’s Severe Ill Health Condition is different to the conditions required to receive Tier 2. As part of your ill health application you will be asked to consent in order for our medical advisers to assess whether you meet HMRC’s severe ill health condition. This test can help to establish whether or not you are exempt from any annual allowance charge in the tax year you retire.

  Remember, any growth in excess of the Annual Allowance may be partially or fully offset if you have any unused annual allowance that you are able to carry forward.

  Q. I am not an active member of the NIFRS Pension Scheme will I have a Pension Input Amount?
  A. If you have been a deferred member for the whole of the input period (or a deferred member for part of the pension input period and retired) then you will have no pension input amount.

  Q. I am receiving a pension from NIFRS, will I have a pension input amount?

  A. This depends when you went on pension and if you have paid any growth in your NIFRS Pension benefits in a pension input period:

  • If you retired from employment and took your benefits you will have a pension input amount for the time you accrued benefits in the NIFRS Pension Scheme for that pension input period; And
  • If your benefits are revised to take account late payments or extra membership, then this growth will be included in the pension input period the extra benefits are paid; or
  • If your benefits were paid in an earlier pension input period and there were no revisions to your benefits then you will be a “pensioner member” and your pension input amount will be nil in any pension input period where there is no growth in benefits.

   

• HMRC Self Assessment 2023/24 Pension Savings Statements - Frequently Asked Questions

  HMRC are aware that some members may experience a delay in receiving the Pension Savings Statements (PSS) for the 2023-24 tax year from their scheme due to delays in producing their Remediable Pension Savings Statements. In some instances, members may not have these in time to meet the Self Assessment deadline of 31 January 2025.

  Members should be aware that the government significantly increased the value of the Annual Allowance for the 2023/24 tax year from £40,000 to £60,000. For many members this would mean that their pension rights would have to increase by more than £3,750 over the year, after allowing for CPI, before they might incur an Annual Allowance tax charge.

  Outlined below are the steps that members may need to take in such circumstances.

  I am currently registered for Self Assessment

  Members who are already registered for Self Assessment should still file their returns by the Self Assessment deadline otherwise they may incur a late filing penalty. If members anticipate that they will have breached the Annual Allowance, they should use provisional figures to complete the fields in their tax return.

  Provisional figures should be calculated to the best of a member’s ability. There is further guidance about how to estimate a provisional tax charge here: https://www.gov.uk/hmrc-internal-manuals/self-assessment-manual/sam121190.

  What if I unknowingly breach the Annual Allowance?

  Where a member has reasonable grounds to think that they have not breached the Annual Allowance and therefore does not include a provisional figure in their return, but on receipt of their 2023/24 PSS they have an Annual Allowance charge to pay, they should update their return with these figures.

  Members will not incur a penalty, but interest may be charged.

  Will I be penalised for submitting incorrect provisional figures?

  Members will not incur a penalty for incorrect provisional figures, however, there may be interest charged.

  Interest will be charged where:
  1. The amended figure is greater than the provisional figure provided, and
  2. The member paid the tax charge themselves, rather than use Scheme Pays.

  What should I do when I receive my Pensions Saving Statements (PSS)?

  When members receive their Pensions Saving Statements (PSS) they should update their return with the actual figure. This must be done within 12 months of the Self Assessment filing deadline.

  I no longer need to be registered for Self Assessment (SA)

  If a member only completes Self Assessment because of their pension tax liability and no longer believes that they will incur an Annual Allowance charge for 2023-24, they should inform HMRC that they no longer need to submit a Self Assessment return. Information on how to do that can be found at: https://www.gov.uk/self-assessment-tax-returns/no-longer-need-to-send-a-tax-return

  I am not currently registered for Self Assessment (SA)

  A member who is not already in Self Assessment and expects to be below the Annual Allowance threshold for 2023-2024 does not need to register for Self Assessment.

  If on receipt of their 2023/24 PSS, it transpires that they should have filed a Self Assessment return, members will need to notify HMRC. There may be an automatic penalty applied. In such cases, HMRC can confirm that they would accept the member has a reasonable excuse when appealing the penalty.

  The above information in available in a printable format here.

• Negative Pension Input Amount

  Negative pension input amount in the FPS/NFPS Scheme

  You need to read this information if your FPS/NFPS  Scheme pension savings statement for the relevant tax year 2023/24 (or a subsequent tax year) shows that you have a negative pension input amount. It should be read together with the Pension Savings Statement Guide above.

  Check if you have a negative pension input amount

  A negative pension input amount in the FPS/NFPS Scheme will be displayed as a minus amount.

  A minus amount

  Your FPS/NFPS Pension Scheme

  2023/24 Annual Allowance Pension Savings Statement

  Pension Scheme Tax Reference:

  FPS 2007 – (PSTR) 00775770RC

  NFPS 2007 – (PSTR) 00691730RC

  Relevant Tax Year
  Your Pension input amount in the relevant tax year is:
  Pension Input Period Start	Pension Input Period End	Standard Annual Allowance (across all of your pension schemes)	Pension Input Amount (Growth) in the FPS/NFPS  Pension Scheme
  06/04/2023	05/04/2024	£60,000.00	£-20,000.00

  In this statement the £-20,000.00 is a negative pension input amount.

  HMRC changes for public service pension schemes from 2023/24

  The government announced a change to the calculation of the pension input amount for public service pension scheme members in the Spring Budget 2023 and this was introduced in the Finance Act 2004 (Registered Pension Schemes and Annual Allowance Charge) Order (SI 2024/357).

  From tax year 2023/24, if your pension input amount in the 1995/2008 Scheme is calculated to be a negative amount, you are allowed to offset this against a positive pension input amount in the 2015 Scheme in the same tax year.

  Before the changes, the 1995/2008 Scheme pension input amount would have automatically been treated as zero and this remains the situation for tax years before 2023/24. The change to the 1995/2008 Scheme will result in you having more annual allowance headroom overall and reduce the potential of an annual allowance charge.

  The change does not affect the 2015 Scheme. Therefore, a pension input amount is shown as either zero, or a positive amount in the 2015 Scheme pension input amount.

  The information in this factsheet will update you of the government’s changes to the calculation of the pension input amount of annual allowance. It will also help you to calculate your total NIFRS Pension Service Scheme pension input amount if you have a negative pension input amount, so that you can determine whether you have an annual allowance tax charge to pay.

  No changes for non-public service pension schemes

  If you have other pension benefit growth in 2023/24 there is no change to the calculation of a pension input amount in a non-public service pension scheme. Your pension input amount will be shown as either zero, or a positive amount.

  You are also not allowed to offset a FPS/NFPS Scheme negative pension input amount against a positive pension input amount in another registered pension scheme. This includes the additional voluntary contributions (AVC), or another public service pension scheme.

  Calculating your ‘total NIFRS Pension Service Scheme pension input amount’ in a relevant tax year

  As a member of both the FPS/NFPS Scheme and the 2015 Scheme you may receive two pension savings statements – note that these could be sent separately or together. Each pension savings statement will show your pension input amount in the relevant tax year and the three previous tax years in that NIFRS Pension Scheme. Your ‘total NIFRS Pension Scheme pension input amount’ in each tax year is your FPS/NFPS Scheme pension input amount added to your 2015 Scheme pension input amount.

  You will need to calculate your total NIFRS Pension Scheme pension input amount for the relevant tax year from the information provided in both statements.

  Example 1

  A member receives the following pension input amounts in the pension savings statements.

  Your FPS/NFPS NIFRS Pension Scheme

  2023/24 Annual Allowance Pension Savings Statement

  Pension Scheme Tax Reference:

  FPS 2007 – (PSTR) 00775770RC

  NFPS 2007 – (PSTR) 00691730RC

  Relevant Tax Year
  Your Pension input amount in the relevant tax year is:
  Pension Input Period Start	Pension Input Period End	Standard Annual Allowance (across all of your pension schemes)	Pension Input Amount (Growth) in the FPS/NFPS NIFRS Pension Scheme
  06/04/2023	05/04/2024	£60,000.00	£-10,000.00

  Your 2015 CARE NIFRS Pension Scheme

  2023/24 Annual Allowance Pension Savings Statement

  Pension Scheme Tax Reference:

  2015 CARE – (PSTR) 00821297RV

  Relevant Tax Years
  Your Pension input amount in the relevant tax year is:
  Pension Input Period Start	Pension Input Period End	Standard Annual Allowance (across all of your pension schemes)	Pension Input Amount (Growth) in the 2015 CARE NIFRS Pension Scheme
  06/04/2023	05/04/2024	£60,000.00	£65,000.00

  The total NIFRS Pension Scheme pension input amount is £65,000 + (-£10,000) = £55,000

  If the member’s available annual allowance is £60,000 the total NIFRS Pension Scheme pension input amount of £55,000 is less than this amount. The amount is then added to any pension input amount in another registered pension scheme. This is the total pension input amount.

  Example 2

  In this example the FPS/NFPS NIFRS Pension Scheme pension input amount remains as £-10,000, but the 2015 CARE Pension Service input amount is £85,000.

  Your FPS/NFPS NIFRS Pension Scheme

  2023/24 Annual Allowance Pension Savings Statement

  Pension Scheme Tax Reference:

  FPS 2007 – (PSTR) 00775770RC

  NFPS 2007 – (PSTR) 00691730RC

  Relevant Tax Year
  Your Pension input amount in the relevant tax year is:
  Pension Input Period Start	Pension Input Period End	Standard Annual Allowance (across all of your pension schemes)	Pension Input Amount (Growth) in the FPS/NFPS NIFRS Pension Scheme
  06/04/2023	05/04/2024	£60,000.00	£-10,000.00

  Your 2015 CARE Pension Scheme

  2023/24 Annual Allowance Pension Savings Statement

  Pension Scheme Tax Reference:

  2015 CARE – (PSTR) 00821297RV

  Relevant Tax Years
  Your Pension input amount in the relevant tax year is:
  Pension Input Period Start	Pension Input Period End	Standard Annual Allowance (across all of your pension schemes)	Pension Input Amount (Growth) in the 2015 CARE Pension Scheme
  06/04/2023	05/04/2024	£60,000.00	£85,000.00

  The total NIFRS Pension Service Scheme pension input amount is £85,000 + (- £10,000) = £75,000.

  As the member’s available annual allowance is £60,000 the total NIFRS Pension Scheme pension input amount is more than this amount. This amount is then added to any pension input amount in another registered pension scheme. This is the total pension input amount.

  Calculating your total NIFRS Pension Scheme pension input amount in a carry forward tax year

  Any annual allowance you have not used in the previous three tax years can be added to your annual allowance in the relevant tax year. This is ‘carry forward’. Carry forward gives you a higher available annual allowance to use against the relevant tax year’s total pension input amount, which reduces your potential for having an annual allowance charge.

  If you’ve received a pension savings statement for a relevant tax year after 2023/24, and one or more of your previous three tax years includes a tax year from 2023/24 onwards, you’ll need to calculate your total NIFRS Pension input amount or each tax year where you have a negative FPS/NFPS Scheme pension input amount. You will be able to do this using the information provided in the pension savings statements.

  Example 3

  The member has a negative pension input amount in the FPS/NFPS Scheme in one or more of the previous three tax years.

  FPS/NFPS NIFRS Pension Scheme

  Carry Forward Tax Years
  Your Pension input amounts in the last three tax years are:
  Pension Input Period Start	Pension Input Period End	Standard Annual Allowance (across all of your pension schemes)	Pension Input Amount (Growth) in the FPS/NFPS NIFRS Pension Scheme
  06/04/2023	05/04/2024	£60,000.00	£-7,000.00
  06/04/2022	05/04/2023	£40,000.00	£0.00
  06/04/2021	05/04/2022	£40,000.00	£15,000.00

  2015 CARE Pension Scheme

  Carry Forward Tax Years
  Your Pension input amounts in the last three tax years are:
  Pension Input Period Start	Pension Input Period End	Standard Annual Allowance (across all of your pension schemes)	Pension Input Amount (Growth) in the 2015 CARE Pension Scheme
  06/04/2023	05/04/2024	£60,000.00	£33,000.00
  06/04/2022	05/04/2023	£40,000.00	£29,000.00
  06/04/2021	05/04/2022	£40,000.00	£26,000.00

  The total NIFRS Pension Scheme pension input amount is £33,000 + (- £7,000) = £26,000.

  For 2023/24 the member has £34,000 of unused annual allowance to carry forward. This amount can be added to their annual allowance in the relevant tax year, along with £11,000 unused annual allowance from 2022/23. There is no unused annual allowance from 2021/22.

  You can only offset a negative FPS/NFPS Scheme pension input amount against a positive 2015 Scheme pension input amount in the same tax year (from 2023/24). It is not possible to offset a negative FPS/NFPS Scheme pension input amount in one tax year against a positive 2015 Scheme pension input amount in a later tax year.

  HMRC does not permit the carry forward of any unused negative pension input amount. The maximum amount of unused annual allowance that can be carried forward is the standard annual allowance for the tax year, unless you are subject to a lower annual allowance (for example, the tapered annual allowance).

  More information about the annual allowance, carry forward and the tapered annual allowance can be found in the ‘Pension Savings Statement Guide’, on the ‘Annual Allowance’ section of our website at: Annual Allowance Pension Savings Statement Guide | HSC Pension Service (hscni.net).

  Calculating your ‘total pension input amount’ in a relevant tax year

  Your total NIFRS Pension Scheme pension input amount is then added to any pension input amount you may have in another pension scheme or arrangement, this will be your ‘total pension input amount’. Your total pension input amount is then tested against your available annual allowance for that tax year.

  In examples 1 and 2 there is the potential for an annual allowance charge if the total pension input amount (total NIFRS Pension Scheme pension input amount, added to any other registered pension scheme’s pension input amount) is more than your available annual allowance, unless the member has enough unused annual allowance from the previous three tax years to carry forward.

  HMRC’s Annual Allowance calculator

  You can use HMRC’s annual allowance calculator to check whether you have an annual allowance charge. You can find HMRC’s calculator at: https://www.gov.uk/guidance/check-if-you-have-unused-annual-allowances-on-your-pension-savings

  If you have a negative pension input amount in the 1995/2008 Scheme you will need to calculate your total NIFRS Pension Scheme pension input amount for this tax year. You can do this by adding your negative FPS/NFPS Scheme pension input amount to your 2015 Scheme pension input amount.

  You will then need to enter your total pension input amount (total NIFRS Pension Scheme pension input amount, added to any other registered pension scheme’s pension input amount) into the calculator and the calculator result screen will then show you any excess pension input amount on which tax is due.

  We are currently updating the Pension Savings Statement Guide on the ‘Annual Allowance’ section of our website to include the information in this factsheet.

• Process for Calculating Annual Allowance

  NIFRS Pension Scheme – Process for calculating the Annual Allowance

  The Annual Allowance is calculated by deducting the opening value of a members benefits, adjusted for inflation, from the closing value of the members benefits in any tax year.

  The opening value is the value of a members benefits at the beginning of the pension input period converted into a capital value, which is increased by the CPI from the previous September.

  The closing value is the value of a members benefits at the end of the pension input period converted into a capital value.

  The pension input period (PIP) is the period over which growth in a members pension saving is assessed; the pension input period for the NIFRS Pension Scheme is 1 April to the following 31 March until 31 March 2015. From 1 April 2015, the PIP was changed to end on 5 April 2016 and subsequent PIP’s will run from 6 April to the following 5 April.

  The pension input amount (PIA) is the monetary amount a members savings have grown by in the pension input period and is calculated by determining the difference between the opening and closing values.

  Pension Input Amount Calculations

  The pension input amount is the increase or growth in the value of a member’s benefits over the pension input period. The amount of benefit growth in the NIFRS Pension Scheme is not based on the amount of employee or employer contributions paid but is the difference between the value of benefits at the start of the pension input period (the opening value) compared with the value at the end of the pension input period (the closing value).

  The relevant tax year is the year in which the pension input period ends.

  A member has a pension input amount if they were active for all or part of the pension input period. This includes if they cease active membership during the pension input period, for example, where they leave the Scheme to defer, to retire or transfer out their NIFRS Pension benefits.

  The Opening Value

  The opening value is determined as follows.

  1. Calculate the member’s NIFRS Pension benefits up to the day before the beginning of pension input period.
  2. Multiply the annual pension by 16.
  3. For a FPS member calculate their lump sum and add this to the amount at step 2.
  4. Increase the total after step 3 by the Consumer Price Index (CPI).

  Below is a table of the CPI increases used for Annual Allowance.

  Tax year of Pension Input Period	CPI
  2008/09	1.8%
  2009/10	5.2%
  2010/11	1.1%
  2011/12	3.1%
  2012/13	5.2%
  2013/14	2.2%
  2014/15	2.7%
  2015/16	2.5%*
  2016/17	0.0%
  2017/18	1.0%

  * HMRC confirmed that the increase on the opening value for 2015/16, only, was 2.5% and not CPI.

  The Closing Value:

  The closing value is determined as follows.
  1. Calculate the member’s NIFRS Pension benefits up to the end of the pension input period.
  2. Multiply the annual pension by 16.
  3. For a FPS member calculate their lump sum and add this to the amount at step 2.

  Calculating the pension input amount

  To find the growth in NIFRS benefits simply subtract the opening value from the closing value. If the difference is a negative amount then the pension input amount is nil.

  Further Considerations

  Adjustment to the closing value:

  Certain events can cause the closing value of the member’s benefits to be bigger or smaller than they would otherwise be. These events include where:

  • a transfer payment has been made or received or,
  • following a pension share order (because of divorce) there is a pension debit or credit attached to the member’s benefits, or
  • the member leaves active membership and retires

  In these circumstances an adjustment must be made to the amount of the closing value in the pension input period during which the event occurred.

  If there has been a transfer in during the pension input period from a non-Club Scheme

  The transfer in membership credit is ignored when calculating the closing value for the pension input period during which the transfer in payment was received. The transfer in membership credit will be included in both the opening and closing values for the next pension input period.

  If there has been a transfer in during the pension input period from a Club Scheme from 28 January 2015

  The transfer in membership credit is ignored when calculating the closing value for the pension input period during which the transfer in payment was received. The transfer in membership credit will be included in both the opening and closing values for the next pension input period if the transfer was completed before 28 January 2015.

  If the transfer was completed on or after 28 January 2015 the transfer in membership credit will be included in the calculation of the pension input amount in the pension input period the transfer was received.

  If there has been a transfer out during the pension input period

  Where there has been a transfer out then the pension input period ends on the last day of pensionable membership.

  If there has been a pension debit during the pension input period

  The pension debit is ignored when calculating the closing value for the pension input period during which the pension share order became effective i.e. the opening and closing values will be calculated on the members unreduced benefits. The pension debit will be deducted from NIFRS Pension benefits when calculating both the opening and closing values for the next pension input period.

  If there has been a pension credit during the pension input period

  The pension credit is a separate deferred arrangement and is therefore ignored when calculating the opening and closing value for the pension input period.

  If there has been a crystallisation of NIFRS benefits during the pension input period

  Where an active member retires the pension input period ends on the benefit crystallisation event (BCE) date.

  Pension input amount of nil

  The pension input amount is nil if during the pension input period a member:

  • dies;
  • retires because of ill health and meets HMRC’s severe ill health condition;
  • has been deferred for the whole of the pension input period;
  • has been deferred for part of the pension input period who then retires;
  • leaves the scheme and has a refund of contributions;
  • has pension credit benefits only.

  Or maybe nil in circumstances where there is a negative amount either because:

  • the pensionable pay used to calculate benefits for the opening value is higher than that used to calculate benefits for the closing value, and/or
  • the growth in CPI, used in the opening value outweighs the actual growth of the NIFRS Pension benefits.