RPSM06300020 - Scheme Administrator pages: Annual allowance: Changing pension input periods

Changing pension input periods and nominated dates

This guidance explains the annual allowance rules up to 5 April 2011. If you want to know how the annual allowance works after that date see the guidance at http://www.hmrc.gov.uk/pensionschemes/annual-allowance/index.htm.

The member’s first pension input period will, unless otherwise changed, end at the anniversary of the start date. So a period starting on 1 June 2006 will end on 1 June 2007.

However, you (or in a money purchase arrangement that is not a cash balance arrangement, either you or the member), may opt to end it sooner. This earlier date is referred to as a ‘nominated date’. This ‘nominated date’ allows a change to be made to the period relating which would otherwise have been the anniversary of the date the member entered into the arrangement.

The nomination by either you or the member does not concern HMRC. Any nomination should be made by notice to the member(s) concerned. In the case of a money purchase arrangement (other than a cash balance arrangement) where the member also has the right to nominate, the member should nominate by sending a notice to the scheme administrator.

If you both make a nomination in relation to the first pension input period, the legislation provides that it is the first nomination made, rather than the earliest date chosen that becomes the nominated date.

The second pension input period will follow on from the first. It will end (if no nomination is made) on the anniversary of the end of the preceding period. In the above example, this will be 1 June 2008, but it may end earlier if a nomination is made. But such a nomination must be in the tax year following that in which the preceding pension input period ended. Later periods follow suit.

You may wish, for example to use the end of the annual scheme year as a nominated date. So the information you will normally provide to the member may include details to enable the member to calculate the pension input amount. This pension input amount will be the amount from the pension input period ending in the tax year concerned. For example, you may find it a work-saving measure to provide information on the pension input amount at the end of the scheme year. This might be when you are providing other scheme information, and so you can use the scheme year-end as a nominated date. This saves individual requests coming from members asking for information.

In the case of defined benefits arrangements the pension input amount will relate to the increase in the pension input period of accrued rights.

In money purchase arrangements (other than a cash balance arrangement) the annual allowance test will be on the total amount of contributions (both member and employer) paid in the pension input periods.

In a hybrid arrangement, it is the greater of the increase from the different varieties that will determine the pension input amount.

For all types of arrangements, contracting out contributions in the form of minimum payments or minimum contributions do not count determining a pension input amount.

For more detailed information on Pension Input amounts see RPSM06100000