PTM052100 - Annual allowance: pension input periods
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Meaning of pension input period
Start date for first pension input periods - general
First pension input period starts on 8 July 2015
First pension input period starts on or after 9 July 2015
Open pension input periods that started before 8 July 2015
When pension input periods stop for an arrangement
Transitional rules for tax year 2015-16
Meaning of first contribution to an other money purchase arrangement
Enhanced protection
Pre-6 April 2006 deferred members
The guidance on this page applies to pension input periods that start on or after 8 July 2015.
Different rules applied for pension input periods that started before 8 July 2015.
For guidance on pension input periods that started before 8 July 2015 see the Registered Pension Schemes Manual on the National Archives website (external users please refer to: http://webarchive.nationalarchives.gov.uk/*/http://hmrc.gov.uk/manuals/r…).
Meaning of pension input period
Sections 238(2), 238ZA & 238ZB Finance Act 2004
A pension input period is the period over which the amount of pension saving (pension input amount) under an arrangement is measured. The measurement works on the principle of how much was saved from the start of the pension input period to the end of the pension input period.
To work out if an individual’s pension saving is more than the annual allowance for a particular tax year the pension savings for pension input periods that end in that tax year is taken into account.
Start date for first pension input periods - general
The first pension input period for an arrangement starts on the ‘relevant commencement date’.
The ‘relevant commencement date’ is for a:
- defined benefits arrangement or a cash balance arrangement, when benefits start to accrue to or in respect of the individual. This also applies to a hybrid arrangement where the only benefits are cash balance or defined benefits.
- money purchase arrangement (other than a cash balance arrangement), when the first contribution is paid (for more information see Meaning of first contribution to an other money purchase arrangement further down this page).
- hybrid arrangement under which the benefits that may be provided include money purchase benefits that are not cash balance benefits, whenever the earlier of the above applies.
Typically the first pension input period coincides with the setting up of a new arrangement.
However, a first pension input period might start at some point after an existing arrangement has been established, for example where:
- benefits to or in respect of the individual start to accrue again under an existing arrangement where the last such accrual had ceased before 6 April 2006 (more information under heading Pre-6 April 2006 deferred members further down this page), or
- benefits to or in respect of the individual have continued to accrue since before 6 April 2011 under an existing arrangement, or start to accrue again on or after 6 April 2011 under an existing arrangement, where the individual has enhanced protection (see PTM051400 and Enhanced protection further down this page for more information).
First pension input period starts on 8 July 2015
When the first pension input period for an arrangement starts on 8 July 2015 that pension input period also ends on 8 July 2015 (i.e. on that same day).
The subsequent pension input periods for that arrangement are:
- the period starting on 9 July 2015 and ending on 5 April 2016, and then
- the tax year 2016-17 (i.e. starting on 6 April 2016 and ending on 5 April 2017) and so on for subsequent tax years.
First pension input period starts on or after 9 July 2015
When the first pension input period for an arrangement starts on or after 9 July 2015 that pension input period will end on the following 5 April.
The subsequent pension input periods for that arrangement are the tax years beginning after the 5 April on which the first pension input period ended.
For example, if the first pension input period ends on 5 April 2016, the next pension input period will start on 6 April 2016 and end on 5 April 2017 and so on for subsequent tax years.
Note, if the first pension input period actually starts on a 5 April it will end on that same 5 April (and not the following 5 April).
Open pension input periods that started before 8 July 2015
Any open pension input periods that had started before 8 July 2015 (whether or not the first pension input period for the arrangement) end on 8 July 2015.
The subsequent pension input periods for that arrangement are:
- the period starting on 9 July 2015 and ending on 5 April 2016, and then
- the tax year 2016-17 (i.e. starting on 6 April 2016 and ending on 5 April 2017) and so on for subsequent tax years.
When pension input periods stop for an arrangement
The last pension input period for an arrangement will be the one in which the individual becomes entitled to all benefits under that arrangement. The last pension input period does not stop when entitlement occurs; it continues until the due end date for that period.
This also applies when all benefits are transferred from the arrangement.
After pension input periods have stopped for an arrangement, there is no need to test the benefits in payment relating to that arrangement against the annual allowance. This means that if a BCE 3 occurs it only needs to be included in the pension input amount if it occurs after the member became entitled to their benefits but before the end of the last pension input period. A BCE 3 that occurs after the end of the last pension input period is not included in calculating the pension input amount.
Transitional rules for tax year 2015-16
Transitional rules apply for tax year 2015-16 to ensure that all pension input periods are aligned and match the tax year with effect from 6 April 2016. This includes splitting tax year 2015-16 into two ‘mini’ tax years for annual allowance purposes only; the first mini tax year being 6 April 2015 to 8 July 2015 and the other 9 July 2015 to 5 April 2016.
PTM058000 has more information about the transitional rules.
Meaning of first contribution to an other money purchase arrangement
The first pension input period for an other money purchase arrangement will start from the date the first contribution is paid to the arrangement.
For this purpose the first contribution means:
- a relievable pension contribution paid by, or on behalf of, the individual, or
- a contribution paid in respect of the individual by the individual’s employer.
The first contribution can also include an employer’s contribution that was not initially allocated to the individual’s arrangement, but allocated at a later date. The date of the allocation to the member’s arrangement is taken as the date of payment and not the date it was initially paid to the pension scheme.
Where the arrangement has been contracted out of the State Second Pension, minimum payment rebate and contracting out rebates paid by HMRC are not relievable pension contributions and will not start a pension input period.
The way that a contribution is paid can affect the payment date for a contribution. PTM041000 and PTM053200 give guidance on when a contribution is paid.
Enhanced protection
An individual who has enhanced protection is fully liable to the annual allowance provisions with effect from 6 April 2011.
This is primarily a consideration for individuals with a defined benefits and/or cash balance arrangement as the individual could continue to meet the conditions for enhanced protection but still have pension input amounts to measure against the annual allowance.
For individuals with such an arrangement that was in existence on 6 April 2011 the first pension input period for that arrangement will start on 6 April 2011 if benefits to or in respect of the individual have continued to accrue under the arrangement since before that date.
Otherwise the first pension input period for such an existing arrangement (or a new arrangement) will start on the date on or after 6 April 2011 that benefits to or in respect of the individual first start to accrue, or start to accrue again, under the arrangement.
For individuals with an other money purchase arrangement, enhanced protection would be lost immediately a relevant contribution is paid under the arrangement (see PTM092410).
Pre-6 April 2006 deferred members
The annual allowance provisions do not apply to a defined benefits arrangement or cash balance arrangement where the individual became a deferred member (as defined for the purpose of the tax rules) under that arrangement prior to 6 April 2006, and has remained so from then on.
If benefits start to accrue to or in respect of the individual again under the arrangement on or after 6 April 2006 the first pension input period for the arrangement will start when that post-5 April 2006 accrual started and the annual allowance provisions will apply.
PTM053900 has more information about pre-6 April 2006 deferred members including details on where an individual may have ceased to accrue retirement benefits but nevertheless does not count as being a deferred member for the purpose of the tax rules since before 6 April 2006.