Members must tell HM Revenue & Customs (HMRC) if they're subject to either the annual allowance charge or the lifetime allowance charge. To help members find out how much tax they have to pay scheme administrators must give members information about the amount of annual allowance and lifetime allowance used up.
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This is a statement of the amount of pension saving in the pension scheme for a tax year. If a member has more than one pension pot under the same scheme the statement must cover all the member's pension pots.
If you're the scheme administrator you must give a pension savings statement to the member if their pension savings ('pension input amount') is more than the annual allowance. Members need this information to work out if they have to pay the annual allowance charge.
Even if you don't have to send a pension saving statement a member can still ask you to give them this information.
The statement must contain all the following information:
If a member has saved more than £50,000 into a scheme that has a period that starts before 14 October 2010 and ends after 5 April 2011, you must split the details of their savings between the following periods:
You must automatically give a pension savings statement to the member if the amount of their pension savings (pension input amount) in the scheme is more than the annual allowance. You must do this by 6 October following the end of the tax year.
For example, if your scheme pension input period runs from 1 January 2014 to 31 December 2014, the pension saving statement for the 2014-15 tax year must be sent by 6 October 2015.
The deadline for statements for 2011-12 and 2012-13 is 6 October 2013.
If you don't have to automatically send a statement you must give the member the information they've requested within three months. If they ask for the information before 6 July following the end of the tax year you have until 6 October to give them this information.
Sometimes you won't be able to give the pension statement within these deadlines because you're waiting for information from another person - such as from a scheme employer. In this case you have three months to send the statement after you get the information.
If you don't provide the information on time or it's incorrect you may be charged a penalty. More on this in the link below.
At various times you have to check whether a member's pension savings have exceeded the lifetime allowance rate - this happens when what is known as a 'benefit crystallisation event' (BCE) occurs.
When you've carried out this check you must tell the member what percentage of the lifetime allowance they've used up by the BCEs occurring in the scheme.
If their pension started to be paid after 6 April 2006 and you're paying a pension to the member you must provide this information at least once every tax year.
If you're not paying a pension - for example because the scheme only paid a lump sum, you must provide this information within three months of the BCE.
You can stop providing an annual lifetime allowance statement in the following circumstances:
The member and scheme administrator are jointly liable to pay the lifetime allowance charge unless the event causing the charge is the member's death. In most cases the scheme administrator must report the charge and pay the tax due using the Accounting for Tax (AFT) Return. You must give the following information to the member within three months:
The member needs this information to complete their Self Assessment tax return telling HMRC how much tax was payable and how much their scheme paid.
If your scheme is making a payment because the member has died the scheme doesn't pay the lifetime allowance charge.
If your scheme has paid a lump sum death benefit that uses up the member's lifetime allowance you must tell the member's personal representative. You must give them the following information within three months:
The member's personal representative may ask for information on any other benefits the scheme has paid that used up the member's lifetime allowance. You must give them this information within two months of their request.