Guidance

Newsletter 165 — December 2024

Published 5 December 2024

Managing pension schemes service

Pension scheme return (PSR)

From April 2025, you will need to submit any returns for the tax year 2024 to 2025 onwards on the Managing pension schemes service. You will not be able to file a PSR for the tax year 2024 to 2025 onwards on the pension schemes online service.

HMRC will send you a notice to file 2024 to 2025 returns for schemes on the Managing pension schemes service. The notice to file will outline the deadline the pension scheme return must be submitted by.

There will be two types of PSR:

• standard
• self-invested person pension (SIPP)

The type of scheme you have registered will determine which PSR you will have to complete. We’ll ask for more information than we used to for previous PSRs that were completed on the pension schemes online service.

Depending on the size of the scheme, different information will be required as part of the return. For a pension scheme that requires a standard PSR, a full return (including members’ details) will only be required for schemes with fewer than 100 members. Most schemes will need to provide designatory details.

To help prepare for this, you can read further guidance in Changes to 2024 to 2025 pension scheme return for Pension Scheme Administrators.

Migrate your pension schemes now

You should be migrating your pension schemes to the Managing pension schemes service now.

Migrating to Managing pension schemes service allows you to see all your schemes in one place and benefit from real-time updates so that you can immediately see changes, view submitted information and details of payments and charges.

You can view a list of your open pension schemes registered on the Pension schemes online service, on the Managing pension schemes service before you migrate.

You’ll need to enrol on the Managing Pension Schemes service before you can view the list of schemes.

Once enrolled, you should then select ‘Add a pension scheme from the Pension schemes online service’ and select each scheme you need to migrate. You should not select ‘Apply to register a new pension scheme.’

Only pension schemes with a status of ‘open’ on the Pension schemes online service will be included on your list of schemes to migrate. If you can see schemes on your list that are inactive and should be wound up, you should email: [email protected] and put ‘Managing pension schemes — Wound Up Schemes’ in the subject line. 

Incorrect re-registrations

If you’ve incorrectly tried to re-register an existing pension scheme that you’re an administrator for, email: [email protected] and put ‘Incorrect scheme registration’ in the subject line.

For more information

Find further guidance on migrating your pension schemes to the Managing pension schemes service.

Event Report

You can no longer compile and submit new event reports for any tax year from 2023 to 2024 onwards on the Pension schemes online service.

In Managing pension schemes service newsletter — September 2023 we told you that you can now compile and save the event reports on the Managing pension scheme service.

If you need to submit an event report for the tax year 2023 to 2024 onwards you will need to compile and submit this directly on Managing pension scheme service.

Find out more about sending pension scheme reports to HMRC.

Pension payments to trustees in bankruptcy 

In the Pension schemes newsletter 93 we published information on the tax treatment of payments to trustees in bankruptcy. The article correctly states that once benefits are paid to the trustee in bankruptcy the member may be subject to the money purchase annual allowance (MPAA) on further contributions. 

The article also said normal Income Tax rules apply to payments to trustees in bankruptcy. This was an error and we remain of the view that such payments are taxable only at the basic rate, even if the member is a higher rate taxpayer, as set out in our guidance at CWG2. The payments to the trustees in bankruptcy are considered paid to the member under Part 4 Chapter 3 Finance Act 2004 but are not regarded as part of the member’s income; they should be treated as income received by the trustee in bankruptcy.

Tax treatment of tax-free lump sums paid back into a registered pension scheme

We are aware that some schemes are being asked by members how they can return payments of pension commencement lump sums (PCLS) or uncrystallised funds pension lump sums (UFPLS) that they took because of speculation about changes that might occur affecting their pensions in the 2024 Autumn Budget. 

Some pension contracts and policies allow for a cooling-off period. Under Financial Conduct Authority (FCA) rules, cooling off rights apply to the purchase of a new product only, for example the purchase of an annuity. The payment of a PCLS or UFPLS is not a new product, which means that cooling off periods do not apply to those payments.

If the conditions for making a payment of a PCLS or UFPLS are not met, for example if a member is not entitled to a relevant pension such as a pension, a lifetime annuity or putting funds into drawdown, within 6 months of the PCLS being paid, it is an unauthorised payment and the unauthorised payments charges will apply. Read the Pensions Tax Manual: PTM063210 and Pensions Tax Manual: PTM063300 for further details. 

The payment of a tax-free lump sum cannot be undone and the member’s lump sum allowance will not be restored. The lump sum must be tested against their lump sum allowance at the time the lump sum was paid from their pension scheme.

Unauthorised payments charges may apply if contributions to pension schemes are made out of tax-free lump sums and the conditions for the recycling rule are met.

Lifetime allowance (LTA) abolition

Further regulations required to complete the work to abolish the LTA came into effect on 18 November 2024 and apply from the 6 April 2024 onwards.

We are now in the process of updating our guidance to ensure the changes have been captured. You should continue to check the Pensions Tax Manual and GOV.UK for updates.

Since publication of the amending legislation, we have received several queries which we would like to address. All references to regulations are to The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024.

Transitional tax-free amount certificates (TTFACs)

Transitional rules for those who have already received a TTFAC

Regulation 17(5)(2) states that, when a TTFAC is issued or cancelled, the member must send a copy of the certificate to other schemes of which they are a member within 90 days or before any relevant benefit crystallisation event (RBCE).

The earliest date from which the 90-day period can begin to run is the day on which the regulations came into force, 18 November 2024. Although the regulations have effect from the start of the current tax year, the obligations imposed by them only apply once they have come into force.

How pre-commencement pensions should be treated when applying for a TTFAC

Individuals whose only pensions in payment are pre-commencement pensions and who have had no benefit crystallization events (BCE) between 6 April 2006 and 6 April 2024 are not eligible to apply for a transitional tax-free amount certificate. 

This is because the decision on how to treat pre-commencement benefits was taken in 2006 when the LTA was first introduced. Therefore, the pre-existing calculation continues to apply as it did prior to the abolition of the lifetime allowance. 

Individuals who have pre-commencement pensions in payment, but who have had one or more benefit crystallisation event between 6 April 2006 and 6 April 2024, are eligible to apply to a transitional tax-free allowance certificate. These individuals should not provide evidence for any pre-commencement benefits taken before 6 April 2006 and should just provide evidence for BCEs taken between 6 April 2006 and 5 April 2024, alongside evidence of the deemed BCE calculation which happened at the point of the first BCE. Schemes will then calculate 25% of the deemed BCE and the tax-free amount of any actual BCEs taken to calculate the amount of available lump sum allowance or lump sum death benefit allowance.

Age 75 disregard (Regulation 17(7))

Age 75 BCE disregard, only where the member did not receive a lump sum between age 75 and 5 April 2024

We have disregarded the amount that was crystallised at the deemed BCE at age 75 where somebody hasn’t crystallised further benefits since that date. Where they have crystallised further benefits, we haven’t disregarded this amount as they have the option to apply for a TTFAC.

The reason for the difference in treatment is that benefits crystallised after age 75 were generally not treated as BCEs and therefore would have been more complicated to take into account. Individuals aged over 75 who have crystallised further benefits post 75 should consider applying for a TTFAC.

If an individual reached age 75 before 6 April 2024, used up some LTA under any of BCEs 5, 5A or 5B, and had a refund of excess contribution lump sum paid to them before 5 April 2024, their LTA used at these BCEs should still be included in the transitional calculation and these individuals should have the option of applying for a TTFAC.

How schemes should apply the transitional calculation following the age 75 disregard

An individual will go through the standard transitional calculation, and this will be reported on their annual statement. Members will then either notify that they have a TTFAC (requested through another scheme) which will amend their allowances or, at the point they want to crystallise further benefits the scheme will contact the individual to ask if they have accessed further lump sums after age 75. If they haven’t, the standard calculation can be used disregarding any amount crystallised at age 75, or if they have, the individual can apply for a TTFAC if appropriate.

Scheme receiving a transfer after the age of 75 where tax free cash has been taken before the transfer

There are no provisions to compel the transferring scheme to pass on details of tax-free cash taken under that scheme after the age of 75, therefore we would expect receiving schemes to request this information from the member.

Processes for where a BCE5 event occurred prior to 6 April 2024 and no entitlement to further benefits arose under a pension scheme in the period between attaining age 75 and 6 April 2024

Where a BCE5 occurred prior to 6 April 2024, the process has not changed and a one off RBCE statement in relation to the BCE5 should be sent.

TTFACs issued to post 75 members where they have incorrect lifetime allowance previously used amounts on them, due to the deemed BCE at age 75

A TTFAC should be cancelled only where the available Lump Sum Allowance (LSA) or the Lump Sum Death Benefit Allowance (LSDBA) is incorrect. 

Reporting requirements

Taxation in respect of new 5ZA (lump sum(s) paid in reliance on an inaccurate TTFAC)

Lump sums paid in reliance on an inaccurate TTFAC are subject to normal Real Time Information (RTI) reporting and payment processes.

Further queries

We are aware that there may be other queries that have been raised which are not clarified in this newsletter. We will continue to provide further updates as required.

Following the abolition of the LTA, the LTA Administration mailbox is no longer being monitored for policy queries and should not be used.

If you have any queries or feedback related to the PTM, you should email: [email protected]. You can also feedback on PTM guidance by using the ‘report a problem with this page’ tool at the bottom of each page.

Relief at Source (RAS) — residency status reports

Notification of residency status report for 2023 to 2024

Scheme administrators of a RAS pension scheme should now have successfully submitted their annual return of information for 2023 to 2024.

If you have not successfully submitted your annual return of information for 2023 to 2024, we will not be able to provide you with a residency report in January 2025. However, it’s still important that you submit your 2023 to 2024 annual return as soon as possible, otherwise we may stop your subsequent interim repayment claims.

Receiving your notification of residency status report

If you’ve successfully submitted your annual return of information for tax year 2023 to 2024, in January 2025, we’ll tell you the residency tax status of your scheme members, so that you can apply the correct rate of relief at source to your scheme members in the tax year 2025 to 2026.

From mid-January 2025, you’ll be able to download your notification of residency status report from the Secure Data Exchange Service (SDES). Your report will be based on data from your 2023 to 2024 annual return of information.

We’ll send you an email when we start to release the notification of residency status reports. If you want to be added to our mailing list, email [email protected], using ‘Relief at Source — mailing list’ in the subject line.

You’ll also receive an email through SDES when your file is available for you to download. You’ll have 6 days (144 hours) to download this, starting from when we make the file available to you.

You should check that your email address is up to date on SDES and if not, you should update this to avoid delay in accessing your report. If you’re expecting an email from us but do not think you’ve received one, check your junk folder in your email account.

We’ll provide further guidance on what you’ll need to do if you do not receive your report, or there are issues with your report, in a future newsletter.

If you do not receive a notification of residency status report

If you do not receive a residency report in January 2025, you can check your member’s residency status for relief at source by using our look up service. You can check the residency tax status for single or multiple members, or default to the UK basic rate for your members.

If you do not have a residency status for a member by the time you claim relief at source on their first contribution in a tax year, you must treat them as having a ‘rest of UK’ residency status. You must not apply a tax rate based on the member’s address.

Once you’ve used a residency status to claim relief at source for a member, you must use this for the whole of the tax year.