McCloud judgement effect on annual allowance

Fphelp123

I always get great assistance on here so hopefully someone can help with this question

so I am in the civil service pension scheme and have just worked out that I have breached my annual allowance by 10,000 after all carry forward. I also have calculated that if the McCloud remedy had been applied as it was supposed to on 1 April 2022 and I was moved back to the legacy scheme the total annual allowance breach would instead be £900. 

Is there any guidance on how or if this will be corrected in the future?  I would prefer to pay the tax charge myself as with 20 years to work the scheme pays quote is very high compared to the £4000 tax charge. 

So would there be a way to claim this back from HMRC or if I used scheme pays is there a way to get it corrected in future?  

It does seem unfair being penalised because the government couldn’t sort out the McCloud judgement in the several years they have had to do so.  

Any help greatly received. 

Dazed_and_C0nfused

Is the £10,000 taking into account the PIA from Alpha and the legacy scheme (Classic, Nuvos etc)?

Fphelp123

Yes so the PIA is the total of the legacy classic and then alpha plus some AVC’s. If I work it out as classic only plus AVC’s it is much lower dy]use to a year of almost no increase so if McCloud was in effect I would have much lower PIA.

I breached by quite a bit last year as well which used up a lot of carry forward but didn’t result in an annual allowance charge.  

hugheskevi

On or before 1 October 2023, you get rolled back into the legacy scheme. At that date, but not before as you are in alpha until be rolled back for the period 2015-22 and so have to pay charges based on that, your pension inputs get revised.

The scheme will write to you with a set of revised pension inputs based on membership of the legacy scheme. You then recalculate your liabilities in the usual way based on the revised pension inputs. You then contact the scheme to correct the position.

If you paid the charge yourself the scheme will provide compensation, if you paid via scheme pays it will instead amend the scheme pays pension debit (and so paying by scheme pays might end up being more straightforward as then you are not waiting for a cash payment).

There are no timelines as to when the above will happen, but it would seem sensible to try to wrap it all up with the 2022/23 Annual Allowance exercise, and to get as much as possible resolved by 31st March 2024 to avoid any further complications for the 2024/25 tax year.

Fphelp123

hugheskevi said:

On or before 1 October 2023, you get rolled back into the legacy scheme. At that date, but not before as you are in alpha until be rolled back for the period 2015-22 and so have to pay charges based on that, your pension inputs get revised.

The scheme will write to you with a set of revised pension inputs based on membership of the legacy scheme. You then recalculate your liabilities in the usual way based on the revised pension inputs. You then contact the scheme to correct the position.

If you paid the charge yourself the scheme will provide compensation, if you paid via scheme pays it will instead amend the scheme pays pension debit (and so paying by scheme pays might end up being more straightforward as then you are not waiting for a cash payment).

There are no timelines as to when the above will happen, but it would seem sensible to try to wrap it all up with the 2022/23 Annual Allowance exercise, and to get as much as possible resolved by 31st March 2024 to avoid any further complications for the 2024/25 tax year.

Wow thanks for that really comprehensive answer. Scheme pays is probably less hassle as you say. I usually don’t like anything that reduces pension but the revised reduction will be very small.