Annual Allowance Pension Savings Statements Advice
These Annual Allowance Pension Savings Statements are issued to anyone who has exceeded the Annual Allowance cap and are generally issued in the Autumn, on or around 6th October.
Issued if you exceed Annual Pension Allowance
They are only issued if you have exceeded your Annual Allowance, and so if you haven’t had one by then it’s likely you have not exceeded the Annual Allowance.
However, as each statement only relates to the particular scheme it has been issued for, it is the individual’s responsibility to take into account all their registered pension schemes for that tax year when assessing whether the Annual Allowance has been exceeded.
You may not have the usual Annual Allowance. For example, if you have accessed your taxable benefits and are subject to the Money Purchase Annual Allowance (MPAA) or have high income and have a tapered Annual Allowance.
If the Annual Allowance is exceeded (whether standard, tapered or the MPAA) across all pension schemes and there is insufficient unused Annual Allowance to carry forward from previous tax years, an Annual Allowance tax charge will be due. Carry forward cannot be used to increase the MPAA.
Should the Annual Allowance be exceeded, the first step is to see if there is any scope to use carry forward in order to absorb the excess – if there is, then there is no taxable element and HMRC don’t need to be informed (although a record should be kept in case of enquiry).
Declare excess on your self-assessment return
Should an Annual Allowance excess not be absorbed by carry forward, the excess must be declared on a self-assessment return – deadline 31 January following the end of the relevant tax year, so for 2019/2020 the deadline is 31 January 2021.
In some cases the pension scheme can pay the tax charge out of the pension benefits (called ‘scheme pays’) but even where this is the case, the Annual Allowance charge must still be declared on your self-assessment return.
Pension and Savings Advice
For more Pension and Investment advice, talk to Redwood Family Wealth & Estate Planners.
Redwood Financial is one of the South’s leading Investments, Pensions, Wills, Trusts & Estate Planning providers and we are dedicated to helping families to grow, protect and enjoy their wealth. With our unrivalled knowledge of Estate Planning, Lasting Powers of Attorney, Probate, Pensions, Savings & Investments, we can advise on any situation.
We are winners of the prestigious Will Writing Firm of the Year 2018, and an approved member of the Trading Standards Buy With Confidence Scheme.