Information
FAQs
In April 2015, a new pension scheme called the police pension scheme 2015 (PPS 2015) was introduced. As part of the roll out of the new scheme, members closest to pension age as at April 2012 were given ‘protection’ and remained in their legacy scheme after April 2015.
Members within 10 years of normal pension age as at April 2012 – stayed in their existing schemes (known as “transitional protection” ) and members between 10 and 13.5 or 14 years of normal pension age as at April 2012 stayed in their existing schemes for a period ranging from a few months to several years after 2015 (known as tapered protection).
The period from 1 April 2015 to 31 March 2022 is now known as the ‘Remedy period’.
After a legal challenge, the courts determined that these protections were age discriminatory and not fair to all members of the pension scheme i.e. younger members in the scheme were missing out on additional years of benefits from the original pension schemes.
The changes introduced from 1 October 2023 aim to give all members the same choice of benefits for the ‘Remedy period’. We refer to this as Remedy.
Remedy means that all eligible active members will be considered to have accrued benefits in the legacy scheme (either PPS 1987 or PPS 2006) during the remedy period. This is referred to as ‘roll back’ and all eligible active members will roll back on 1 October 2023 to the scheme to which they would have belonged had the PPS 2015 not been introduced on 1 April 2015. These members will subsequently be offered a choice when they retire of legacy or PPS 2015 benefits in respect of their pensionable service during the remedy period.
To enable these changes to be made, new legislation and powers are needed, these have been enacted across the following sets of legislation.
• The Public Service Pensions and Judicial Offices Act 2022 (PSPJOA 22)
The PSPJOA applies to all the main public service pension schemes and received royal assent in March 2022. It provides the necessary powers to make consequential changes to public service pension schemes by 1 October 2023. Chapter 1 of the PSPJOA provides the framework for the remedy, including provision to make changes to public service pension scheme rules. Amendments are required to those rules, including those of the police pension schemes, to implement the Government’s remedy. The PSPJOA also provides for HM Treasury (HMT) to make Treasury Directions, which specify how certain powers under the PSPJOA are to be used by public service pension schemes when making their scheme regulations.
• Tax Regulations
Through using the powers in the Finance Act 2022, two sets of rectification regulations have been consulted on and published.
• The Police Pensions (Remediable Service) Regulations 2023
Home Office consulted on scheme regulations during February 2023 to May 2023, and published the response to the consultation along with the final regulations in July 2023.
Together, these changes will provide a remedy for all those affected by the discrimination identified by the Court of Appeal. The remedy will apply equally to claimants in the employment tribunal and non-claimants and there is no need to make a claim to the employment tribunal to benefit from the changes.
Not all members are affected by remedy.
Members that are eligible to make choices for the remedy period must:
• have been in pensionable service on or before 31 March 2012; and
• had pensionable service between 1 April 2015 to 31 March 2022; and
• not have a gap in service of 5 years or more (known as a disqualifying break).
Pensionable service does not have to have been in the police pension scheme, it could also have been in another relevant public service pension scheme.
Full details about eligibility to the remedy can be found in section 1of the PSPJOA .
1 April 2015 – 31 March 2022.
This is the period of time that some members had protected benefits as part of the transition to the new PPS 2015.
Legacy scheme refers to either of the police pension schemes in place before 1 April 2015, these are PPS 1987 or PPS 2006.
The police pension scheme 2015 (PPS 2015) is referred to as the ‘reformed scheme’ as it was introduced as part of the public sector pensions reforms from 1 April 2015.
Members who joined between 1 April 2012 and 1 April 2015 will have pensionable service in the PPS 2006 for that period only, then transitioned on 1 April 2015 to the PPS 2015 (the reformed scheme).
Member who joined after 2015 will be members of the PPS 2015 for all of their service.
Any benefits built up before 1 April 2015 are not affected.
All benefits accrued during the remedy period are automatically rolled back to the relevant legacy scheme on 1 October 2023 for eligible active and deferred members. You will be able to make a different choice for reformed benefits at your retirement date.
All active members will build up benefits in the PPS 2015 from 1 April 2022. These benefits are not affected by remedy.
All active members are now in the PPS 2015.
You pension will be looked after by an administrator. Your administrator will be different depending on which police force you are/were a member. You can find our who your administrator is on the ‘Find my administrator’ page.
Your administrator may have an online portal where you will be able to access documents about your pension. You may also receive documents in the post from your administrator if you do not have online access.
Every August, you will receive an annual benefit statement from your administrator in respect of membership up to end March of the same year. Because the rollback had not happened, statements issued in August 2023 do not reflect the impact of the remedy or provide information on choices.
Members who were fully protected and could accrue legacy benefits until 31 March 2022, might think as they were protected remedy, doesn’t apply to them.
However, every member needs to be given a choice between legacy and reformed benefits for the remedy period, and as each person’s circumstances are different, until they receive their remediable service statement they will not know whether the benefits offered for the alternative scheme may be a better value for them.
Some members who were protected may have expected to receive a pension savings statement for 2022/23 in October 2023. However, the deadline to receive a statement has been extended until 6 October 2024 for all remedy eligible members.
If a member wishes to retire before 6 October 2024, then they will receive a notional remediable pension savings statement for the remedy period, including 2022/2023 with their retirement pack and will be able to make a scheme pays election at retirement. For more information on when you may make a choice, please refer to the ‘when will I make a choice’ FAQ.
When you make a choice will depend on your whether you are already receiving benefits from a police pension scheme as at 30 September 2023.
• Already receiving benefits
If you are already in receipt of benefits from the scheme, either as a pensioner member or as a beneficiary, this is known as ‘immediate choice’, and you will be offered a choice to change the level of benefits you are in receipt of. This choice will be irrevocable once made.
• Not yet receiving benefits
If you are an active (building up benefits) or deferred (no longer building up benefits but not yet receiving the benefits) member at 30 September 2023, this is known as ‘deferred choice’ and you will be offered a choice about your benefits for the remedy period when you retire.
You may be. If you were in pensionable service (usually when you are making contributions to your pension scheme) during the following periods you will be eligible to make a choice.
• have been in pensionable service on or before 31 March 2012; and
• had pensionable service between 1 April 2015 to 31 March 2022; and
• not have a gap in service of 5 years or more (known as a disqualifying break).
Your administrator will provide you with all the details you need to make a decision. This will be in the form of a remediable service statement (RSS) which will be issued between 1 October 2023 and 31 March 2025.
If you are an active or deferred member, you do not need to make a choice immediately, you will receive an RSS for the first time in August 2024 and annually thereafter reminding you of your options for the remedy period until you retire.
Each police force has its own way for processing retirements. In the first instance you should speak with your HR contact who will guide you through the process.
Once your retirement process is in place, you will be given information to enable you to make choices about your pension during the remedy period and how these affect your pension options.
Your remediable service statement (RSS) will display your options. When you receive your remediable service statement (due to be issued to retired members in phases from 1 October 2023 to 31 March 2025) you will also be given a decision form.
The 18-month timeline is set by government under the rules of the PSPJOA 22. It is set at 18 months because there are lots of people in scope and the rules are complex. While the findings of age discrimination are well known and accepted by scheme managers, and scheme managers have been prepared for remedy, the rules which are set by the Home Office and Treasury have only been recently finalised with the police scheme legislation only being published in July 2023.
Despite this, police pension scheme managers intend to work to an accelerated timescale which will see the most vulnerable and detrimented members prioritised, so that they receive their choice statements in the following order:
• 1 October 2023 – 31 July 2024 – widows, dependants, and ill-health retirees.
• 1 January 2024 – 30 November 2024 – retirees currently in receipt of both legacy and reformed pension. These are members who had to retire with some of their pension being paid from the 2015 scheme.
• 1 October 2024 – 31 January 2025 – retirees with only old schemes (i.e. no PPS 2015 in the remedy period).
This is sometimes known as the ‘Retirement Age Issue’ or ‘Pension Trap’.
In 2010, the government increased the minimum retirement age from age 50 to age 55 and when the government introduced the 2015 scheme this meant that it could not have a retirement age of lower than age 55. Protections, such as protecting the lower retirement age of the 1987 scheme were given to those members who had to move into the 2015 scheme from the 1987 scheme. This means that someone can retire from the 1987 scheme before the age of 55.
As the 2015 scheme has a minimum retirement age of 55, if a member leaves before age 55, benefits from the 2015 scheme become ‘deferred’. A deferred pension from the 2015 scheme becomes payable without reductions from state pension age. Members are able to bring 2015 scheme benefits into payment at any point from age 55, however early retirement reductions will apply. These are based on the number of years and months to the members state pension age. Early retirements from active status have different reduction factors as these are based on the number of years and months to age 60.
This position can sometimes be called a ‘trap’ because if a member leaves before age 55 the benefits from the 2015 scheme cannot be accessed on the preferential terms an active member has, however it is caused because of the protections offered on the earlier retirement age of the 1987 scheme.
Both the 2006 and 2015 schemes have a minimum retirement age of 55, whereas the 1987 scheme continues to allow access to pension benefits before this age.
Under the old legacy schemes, there used to be a Compulsory Retirement Age which meant people had to retire when they met certain criteria, but in 2015 this was removed. This means a member does not have to retire from the 1987 pension because they reach 30 years, they can continue to stay in employment; however the commutation factor which calculates the lump sum reduces with age, so it can be better to claim the lump sum as soon as possible so it remains a higher amount.
Members can ask their employer to ‘retire and return’. If a member is eligible to retire from the 1987 scheme, they have an automatic right to retire there is no requirement to have any permission from the employer. Any re-employment would be subject to the usual employment rules. If a member returns, they will automatically re-join the 2015 scheme as an active member and they can retire from that scheme without reductions at age 60, or earlier from age 55 with reductions.
If you are in service and intend to retire before you receive your Annual Benefit Statement in August 2024 you can use the calculator on the NPCC Police Pensions website to estimate your benefits.
To enable your Pension Administrators to calculate your pension benefits and to provide you with your choice of remedy benefits in a timely manner, you should ensure that you give three months’ notice and, make certain that your Pension Administrator has up to date contact details for you. You should consider holding off from making any financial commitments until you have received confirmation of when your lump sum payment will be made.
Although you become entitled to pension benefits including a lump sum payment from the day after your retirement, this does not necessarily mean that this is when the benefits will be paid as there are a number of things which can affect when the payments are made.
There is no time frame within the regulations for a lump sum to be paid, other than the wider tax regulations which require it to be paid no later than 12 months after retirement.
Your Force will have a standard timeframe in which to make payments that they have agreed with your Pension Administrator. However, pension benefits cannot be processed or paid until all necessary information is received from your Force, such as membership, payroll and contribution data. The Pension Administrator also needs information from you such as your final remedy choice and your lump sum commutation choice.
After all the information is received for benefits to be put into payment, it is expected that payment of benefits should be made as soon as practicable after your retirement date, this will also take into account any additional factors such as payment runs.
When you retire you can take some of your benefits as a lump sum payment.
If you are already a pensioner member, you will be able to revisit your original commutation decision when you receive your remedy options.
You can choose to exchange some of your annual pension to provide a lump sum payment; this is also called commutation.
The commutation rates are based on your age in years and months at the date your benefits become payable. The older you are, the lower the commutation rate which means that you receive a lower rate of lump sum. This is because the pension you have given up would be in payment for a shorter period.
The maximum amount of your annual pension that you may be able to commute is 25%, but this may provide a lump sum which is more than the maximum amount of tax-free cash that you can receive under HMRC limits. Any amount paid over the HMRC limit will be subject to an unauthorised payment tax charge.
You can therefore choose to take a lower lump sum and remain within the HMRC limits, or take the maximum scheme lump sum.
You have an automatic entitlement to a lump sum payment which you can choose to exchange all or part of for additional annual pension; this is called reverse commutation.
The commutation rates are based on your age in years and months at the date your benefits become payable. The older you are, the lower the commutation rate which means that you receive more additional annual pension. This is because the pension would be in payment for a shorter period.
You can choose to exchange some of your annual pension to provide a lump sum payment; this is also called commutation.
The commutation rate is 12:1 this means for every £1 of annual pension you give up, you get £12 in lump sum. This lump sum payment is called a pension commencement lump sum (PCLS) and is the amount of tax-free cash that you can receive, usually this is 25% of the total value of the benefits being accessed; this is the permitted maximum and keeps within the HMRC limits.
Your decision is individual to your own circumstances.
Your administrator will provide you with all the details you need to make a decision. This will be in the form of a remediable service statement which will be issued between 1 October 2023 and 31 March 2025.
Once you have received this document, if you feel you need help making a decision, you can contact a financial adviser. A list of financial advisers can be found at unbiased.co.uk
It is strongly recommended that you make a choice. If you don’t make a choice, your scheme manager will decide for you based on the figures in your remediable service statement.
With remedy you have the choice about what benefits you want to receive for the period 1 April 2015 – 31 March 2022.
All the information you need to make a choice will be provided in a remedial service statement – this includes information about the cost of being a member of each pension scheme. In some cases you may choose a pension scheme that costs more money in contributions, but also pays benefits earlier and/or can give you more income in retirement . The choice will be yours about whether you want to pay more or less to receive a different level of benefit.
The oldest (PPS 1987) legacy scheme has the highest contribution rate. The reformed (PPS 2015) scheme rate is lower, while the PPS 2006 has the lowest contribution rate.
• If you are making an immediate choice (i.e. you are already receiving benefits from a police pension scheme and want to change these), you will need to pay any additional contributions before you receive the new benefits.
• If you are an active or deferred member, you will need to pay your additional contributions in one go. Each year, you will have an opportunity to do this within three months of receiving your RSS, OR you may pay this when you retire, either from your own sources or from the lump sum that you might get from the pension scheme. But interest on owed contributions will continue to be applied until they are paid.
If because of remedy you exceed the annual allowance, you will be sent a revised remediable service pensions savings statement. The deadline for sending this statement will be;
• For active and deferred members – by 6 October 2024
• For pensioner members – within 6 months of making your election.
From 1 October 2023, HMRC is introducing a new service that enables affected members who have new, increased, or decreased annual allowance charges, as well as other tax charges such as lifetime allowance charges and unauthorised payments charges to:
• correct these for tax years 2019/20, 2020/21, 2021/22 and 2022/23
• apply for compensation for any tax charge overpayments for tax years 2015/16, 2016/17, 2017/18 and 2018/19
You will need your revised remediable service pensions savings statement to use this service.
In some cases, changing your pension choice for the remedy period may change the amount of pension you built up each year. This is known as your pension input amount (PIA)
The government sets limits on the amount of pension you can build up each year, known as the annual allowance. During the remedy period this has been £40,000 (historic rates can be seen on the Gov website ). Your PIA is tested against this amount by multiplying the amount by which the value of your pension has increased by 16, if this exceeds the annual allowance for any of the years between 2019 and 2022, you may be liable for a tax charge – known as an annual allowance charge.
You may have already paid a tax charge during the remedy period, or you may owe tax for the first time. When you are making your choice of benefits, you will be told whether you have exceeded the annual allowance, and information about this in a statement alongside your remediable service statement, to help you decide.
Ordinarily, if your annual allowance has exceeded the limit, we have to send you a pensions savings statement by 6 October 2023.
However, for members affected by remedy, this deadline has been delayed until 6 October 2024. This is to ensure your pension figure at 1 April 2022 reflects the corrections to your pension made by remedy. HMRC have confirmed that this delay means you will not need to report any annual allowance charge for 2022/23 on your self-assessment tax return by the standard 31 January 2024 deadline. You’ll still need to submit a self-assessment form to report and pay any other tax charge you are liable for by 31 January 2024.
Members who are not affected by remedy should receive a 2022/23 pension savings statement, if they they have a pension growth (annual value of pension increase x16), by 6 October 2023. If an annual allowance is due for 2022/23, it must be included on your self-assessment tax return.
Active members affected by remedy will not receive a 2022/23 pension savings statements until after remediable service statements have been issued. Because of this, HMRC has extended the mandatory scheme pays deadline for 2022/23, and for any annual allowance charge you may have in tax years 2019/20, 2020/21 and 2021/22 as a result of remedy.
The amended mandatory scheme pays deadlines are:
• For active and deferred members – deadline extended from 31 July 2024 to 6 July 2025
• For pensioner members – deadline extended to 6 July 2027.
For members not affected by remedy, the normal tax deadlines apply.
In the latest set of tax regulations, HMRC have frozen ‘in scope’ tax years for remedy. These are known as ‘relevant tax years’. This means that HMRC cannot collect tax owed from out-of-scope years, however they will still pay compensation for any tax owed back to members for these years.
• In scope years – 2019/20, 2020/21, 2021/22 and 2022/23
• Out of scope years – 2015/2016, 2016/2017, 2017/2018 and 2018/2019
To assess whether you will be entitled to receive any compensation payments for tax owed back to you, or whether you have any new or increased tax charges due as a result of your remedy choice, you will need to use the HMRC calculator to calculate your public service pension adjustment.
Currently there is no option to save the data that you have entered, and therefore it is advisable to check that you have all the necessary data before you start the process. HMRC have provided a list of data so that you can check what information you will need. More information is also available in the newsletter on the public service pensions remedy that was published on the GOV.UK webpages in October 2023.
When your pension administrator issues your remediable service statement, they will also provide you with a notional remediable Pensions Savings Statement. This will show the pension input amount for each of the relevant tax years based on both your legacy scheme and reformed scheme benefits. You will need this information to input into the HMRC calculator to help make your choice of remedy benefits.
Once you have made your choice, you will need to use the calculator again to make your actual submission to HMRC as this is how you will either receive compensation payment or notify your pension administrator that you have an additional tax charge to pay.
You will not have received a revised Pensions Savings Statement (PSS) for the remedy years or made any election to pay those tax charges before you retire.
At your retirement, your pension administrator will re-test your benefits against the annual allowance for the remedy period and for the 2022/23 tax year. You will receive a notional remediable PSS with your Remediable Service Statement (RSS) which will enable you to input this information into the HMRC calculator to help make your choice of remedy benefits.
If you wish to pay the tax charges by scheme pays, you will need to make a scheme pays election at retirement, this can then later be varied once the tax charge has been clarified.
Once you have made your retirement choice and received benefits (known as crystalising), you will receive a final remediable PSS. You will need to use the calculator again to make your actual submission to HMRC as this is how you will either: –
a) receive a compensation payment or,
b) notify your pension administrator that you have an additional tax charge to pay, and then pay it if you do not choose scheme pays.
You will need to ensure that all submissions to HMRC are complete by 31 January 2025, however you are encouraged to do this as soon as possible so any scheme pays can be correctly adjusted on your record.
Any delay may mean you are accruing a scheme pays debt which will need to be adjusted.
After you are rolled back to your legacy scheme, your pension administrator will re-test your benefits against the annual allowance for the remedy period and make an assessment for the 2022/23 tax year.
Where your revised pension input amount has altered any existing position for your annual allowance in any of the years 2015/16 to 2022/23, your pension administrator will issue you with a revised or new Pensions Savings Statement. This must be issued by 6 October 2024. You will then need to use the HMRC calculator to calculate any new or increased tax charges. You must ensure that all submissions are complete by 31 January 2025.
If you have pensions tax to pay because you exceeded the annual allowance in any of the in-scope years, you can choose to have the tax paid by a ‘scheme pays debit’ .
You won’t need to pay anything now, but your pension will be permanently reduced to pay off the debt you owe.
Alternatively, you can pay the tax due from your own resources through a self-assessment tax return process.
The following links allow you to access the calculator and HMRC guidance quickly: –
HMRC public service pension adjustment calculator
The lifetime allowance limits the total amount of pension benefits an individual can build up over their life before receiving a tax charge. It is only applied when those pension benefits come into payment.
In March 2023, the Chancellor announced that the lifetime allowance tax charge would be removed on 6 Apr 2023 and abolished in a future finance bill. So it will not apply to future retirements, but will be relevant to any benefits taken up to March 2023.
Members may still be subject to a tax charge at their marginal rate in future, if they decide to take a lump sum at retirement that exceeds 25% of the lifetime allowance – this is currently £1,073,100 i.e, the lump sum exceeds £268,275. Some members might hold protection against the lifetime allowance, or may have already been paid a lump sum from another pension – this may alter that limit.
For remedy, the lifetime allowance would only impact those members who have an immediate choice (i.e. are already receiving benefits from the police pension scheme).
If you have already been impacted by the lifetime allowance and your decision relating to remedy further increases your lifetime allowance value, you may be subject to a further lifetime allowance tax charge. If the date you started to receive benefits falls in an in-scope year, this is automatically paid from within the scheme. The test is conducted against the lifetime allowance limit that was applicable at the time. Historic LTA rates are available on the Gov website For an out-of-scope year, any additional lifetime allowance charge is not recovered.
As a result of the McCloud age discrimination remedy, you can make changes to your lifetime allowance protection if you are eligible.
• Protect your pension lifetime allowance
How to apply for and check protections from the reductions in lifetime allowance.
Protect your pension lifetime allowance – GOV.UK (www.gov.uk)
•Reinstate your pension lifetime allowance
If you lost your lifetime allowance protection as a result of the public service pension remedy (also known as McCloud), you may be able to reinstate it.
Reinstate your pension lifetime allowance protection – GOV.UK (www.gov.uk)
The tax rules specify the conditions that need to be met for payments to be authorised. Any payment that doesn’t meet these conditions is an unauthorised payment. The most common occurrence of an unauthorised payment charge is when members access their PPS 1987 benefits and take a lump sum.
A pension commencement lump sum (PCLS) is the amount of tax-free cash that you can receive, usually this is 25% of the total value of the benefits being accessed; this is the permitted maximum and keeps within the HMRC limits. The PPS 1987 scheme rules allow you to have a maximum scheme lump sum which is more than the PCLS. The difference between the PCLS and the maximum scheme lump sum is classed as an unauthorised payment.
There is an automatic tax charge on unauthorised payments, known as an unauthorised payment charge (UPC); the rate for this charge is 40%. The UPC will be calculated on the portion of benefits that are classed as an unauthorised payment. Members are asked to confirm if they wish to have this deducted from their benefits or if they wish to pay the charge directly to HMRC via Self-Assessment; this is also called mandating.
Depending on your choices, you may also receive a payment in relation to the interest that could have been built up on higher value benefits you should have received since the beginning of the remedy period, both in terms of pension payable and any lump sum.
The value of this interest payment will depend on a number of factors, including when you make your final decision.
Initially, interest is calculated at 8% a year from the beginning of the remedy period, up 28 days after you receive a remediable service statement (RSS). If you don’t make a decision within this time, your outstanding benefits will still attract interest, but at a lower rate.
You will be given an estimate of the interest you may receive in your RSS.
Yes.
If, once you make your choice, you owe money to the scheme – for example in the form of contribution top ups – interest will be applied to this payment.
The interest on money owed to the scheme is calculated at the NS&I rate for direct saver accounts. As at 23 August 2023, this was 3.65%.
You will be given an estimate of the interest that might be due in your remediable service statement.
• The interest rates were determined by the Government’s three objectives, to firstly reflect the position members would have otherwise been in without the discrimination having occurred, secondly to recognise the circumstances of the award and thirdly to not unduly burden the taxpayer.
• Further details on the rationale can be found in the letter exchanges between HMT and the Government Actuary.
The relevant rates are
• Judgment rate: Currently 8%
• National Saver & Interest (NS&I) Rate: The current ‘Direct Saver’ rate can be found at Interest rates | Current interest rates for our accounts | NS&I (nsandi.com) , historical rates can be found at Historical interest rates | NS&I (nsandi.com)
These rates are set by Chapter 4 of the Government directions – The_Public_Service_Pensions__Exercise_of_Powers_Compensation_and_Information__Directions_2022.pdf (publishing.service.gov.uk)
• OVERPAYMENTS
• Overpaid pension benefits: Relevant historic NS&I rate compounding daily from the date halfway through the pension year they were paid until the date of repayment.
• Overpaid lump sum: NS&I rate compounding daily from the date it was originally paid until the date of repayment
• UNDERPAYMENTS
• Underpaid pension benefits:
• Up until 28 days after RSS issued: Simple interest, calculated daily at the judgment rate from the midpoint benefits were first underpaid to the date of payment. The interest payment may be subject to tax.
• From 29th day after RSS issued: Relevant NS&I rate compounding daily.
Underpaid lump sum:
• Up until 28 days after RSS issued: Simple interest, calculated daily at the judgment rate from the date benefits were first underpaid to 28 days after RSS issued. The interest on this payment may be subject to tax.
• From 29th day after RSS issued: If the lump sum is not paid by 28 days after RSS issued, the interest rate changes to NS&I rate compounding daily.
Interest that is paid on the arrears of lump sum and annual pension may be subject to tax and incur an unauthorised payment tax charge.
Interest on these payments is paid at the rate of 8%, as this is above the Bank of England base rate plus 1% (also called the commercial rate of interest), the amount of interest that is to be paid and is based on the difference between the commercial rate of interest and the 8% interest rate must be assessed for tax purposes.
The interest that is paid on arrears of lump sum and annual pension is known as a Scheme Administrator Member Payment (SAMP).
This charge will only apply to Immediate Choice members if the choice of remedy benefits that they elect for results in arears of lump sum and or annual pension to be paid.
A commercial rate of interest is a fact and is not set by HMRC, but Pension Schemes newsletter 156 confirms that HMRC has accepted 1% above the Bank of England base rate at the time throughout the relevant period as a commercial rate.
Current and historic Bank of England Bank rates can be found at https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp.
Scheme Administration Member Payments (SAMP) are payments made by a registered pension scheme to or in respect of a member, or former member, for the purposes of administration or management of the scheme, this includes paying interest where arrears of lump sum and annual pension are due.
The definition of a SAMP is set out in Section 171 of the Finance Act 2004 and the pension tax manual PTM143100.
– Commercial rate interest paid on a SAMP is an authorised payment.
– Interest paid over a commercial rate on a SAMP is an unauthorised payment.
Interest payments on the arrears of annual pensions are classed as a Scheme Administrator Member Payment (SAMP). This must be broken down into two parts and split between the authorised and unauthorised payments.
– Authorised SAMP: Interest paid on the pension arrears at commercial rate.
– Unauthorised SAMP: Interest paid on the pension arrears over the commercial rate.
Interest payments on additional (top-up) lump sums are classed as a Scheme Administrator Member Payment (SAMP).
Due to your remedy options, there may be a revised Pension Commencement Lump Sum (PCLS) – if this is higher than your original PCLS when you retired, then the difference between the old and new PCLS will be authorised, this is because you will be under the permitted maximum.
– Authorised SAMP: Interest paid on the top-up lump sum at commercial rate.
– Unauthorised SAMP: Interest paid on the top-up lump sum over the commercial rate.
Interest payments on additional (top-up) lump sums are classed as a Scheme Administrator Member Payment (SAMP).
Due to your remedy options, there may be a revised maximum lump sum – if this is higher than your original maximum lump sum when you retired but this also exceeds the Pension Commencement Lump Sum (PCLS) then the difference between the old and new maximum lump sum over the PCLS will be unauthorised.
– Unauthorised SAMP: Interest paid on the unauthorised top-up lump sum.
If the lump sum before interest exceeds the PCLS it is classed as an unauthorised payment. Therefore, any interest that is paid on top of an unauthorised payment will automatically also be unauthorised.
Even beneficiaries are eligible to make decisions about the benefits that were built up in the remedy period.
Like ordinary retirements, your remediable service statement will display your choice of benefits between the legacy and reformed schemes. This will reflect the different levels of ill health pensions in the different police pension schemes and whether you are eligible for them.
If you retired on ill-health as a protected member of the 1987 scheme, you will need a re-assessment with a selected medical practitioner to see if you are eligible to be offered the choice of the higher tier ill-health pension in the PPS 2015. For some members, depending on their age and service, the pension from the PPS 2015 may be higher as it enhances pension based on service to age 60. You will have received information about this from your force.
If you chose to leave the scheme, but built up benefits during the remedy period, you will still be able to make a decision about the benefits that are right for you.
In addition, if your decision was related to the discrimination in the transitional arrangements, you may be able to rescind your decision to opt out during the remedy period
There are various timeframes for when you can make a Contingent Decision claim.
You can make a claim for a Contingent Decision at any point before you receive your Remediable Service Statement, or: –
– Where possible, you should consider making your claim and any subsequent election for a Contingent Decision at least six months prior to your retirement to ensure that there are minimal delays with processing your benefits.
– For Honoraria Contingent Decision claims, these must be made no later than three months after receipt of your Remediable Service Statement.
– For Transfer Contingent Decision claims, these must be made no later than six months after receipt of your Remediable Service Statement.
– For Opt-Out and Additional Service Contingent Decision claims, these must be made no later than 12 months after receipt of your Remediable Service Statement.
There is additional information for members about Contingent decisions on the Member Remedy documentation page in the form of both a Member Remedy factsheet and a claim form.
Added Pension is not an available benefit in the legacy schemes and therefore as part of rollback to the legacy scheme, any Added Pension contributions that have been paid into the 2015 Scheme during the remedy period must be returned to the member.
These payments must be returned to the member in order to comply with the remedy legislation, there is no choice for a member about whether to receive this or not as it is an automatic compensation payment.
The rules about making Added Pension compensatable payments to members is set out in: –
– Section 20 of The Public Service Pensions and Judicial Offices Act (PSPJOA 2022) and
– Part 5, Regulation 27 of The Police Pensions (Remediable Service) Regulations 2023 (Police Scheme Remediable Regulations)
There is additional information for members about Added Pension on the Member Remedy documentation page.
A member is only eligible to make a contingent decision to buy additional service if they would have been eligible to do so at the time.
There is no scheme manager discretion that can determine a different outcome if the member is not eligible, therefore contingent decisions claims will be dismissed if the member is not eligible to make one.
There is additional information for members about Contingent decisions on the Member Remedy documentation page.
A member is only eligible to make a contingent decision to buy additional 60ths in the 1987 legacy scheme if they would have been eligible to do so at the time, with the key criteria being “you could not achieve 30 years by the normal pension age for your rank”.
The rules for purchasing additional 60ths in the 1987 scheme are set out in regulation 3, paragraph 2 of The Police Pensions (Purchase of Increased Benefits) Regulations 1987.
3(2) A policeman shall not so exercise the right of election accorded by paragraph (1) that the aggregate number of sixtieths reckonable by him exceeds or, if he continued to serve until his retirement date, would exceed 40.
A member is only eligible to make a contingent decision to buy added years in the 2006 legacy scheme if they would have been eligible to do so at the time, with the key criteria being “you could not achieve 35 years by the normal pension age for your rank”.
The rules for purchasing added years in the 2006 scheme are set out in regulation 56, paragraph 4 of The Police Pensions Regulations 2006.
56(4) The total number of added years that may be purchased in accordance with regulations 58 and 59 by virtue of such an election shall not exceed five or such lesser number as would entitle the officer, if he were to serve continuously as a full-time member of the force from the date of his election under paragraph (2) until the date specified in accordance with paragraph (3)(b), to reckon a total of 35 years’ pensionable service as at the date so specified.
Transfers are dealt with differently depending on whether a member, elected to transfer benefits into the scheme during the remedy period or not.
Transfers that took place in the remedy period, do not need a contingent decision, they are dealt with in the remediable regulations to allow a conversion to legacy scheme benefits where possible. Members do not need opt for this; it is automatic.
Conversion of existing transfer-ins are dealt with in the remediable regulations in paragraphs 45 and 46
– Paragraph 46 (2a) converts the transfer to legacy service if the legacy scheme would have permitted the transfer (ie capped to 30 years for the 1987 legacy scheme).
– Paragraph 46 (2bi) applies where the legacy scheme would not permit the transfer and there is service after 1 April 2022 in the 2015 scheme. The transfer is treated as 2015 service.
– Paragraph 46 (2bii) applies where the legacy scheme would not permit the transfer and there is no service after 1 April 2022. This treats the transfer as compensation.
A contingent decision is made when a member says they would have done something if it had not been for the discrimination. For transfers, this is where an officer says they would have made a transfer if they had been in a legacy scheme.
Under the legacy scheme rules, a member could have transferred in at any time while they were in the legacy scheme as the regulation that allows transfers-in does not have a deadline.
The amended remediable regulations in paragraph 43A confirms that for:
– A 1987 legacy scheme member regulation F6 of the 1987 Police Pension Regulations (as amended) would have applied, or
– A 2006 legacy scheme member regulation 15 of the 2006 Police Pension Scheme Regulations (as amended) would have applied.
The contingent decision is designed to put the member back in the position that they would have been in if the discrimination had not occurred.
The member guidance covers transfer contingent decisions on page 6.