Will these pension changes result in any tax changes for members?
The vast majority of members will see no changes to their tax position or will receive a refund as a result of the remedy.
In some cases, individuals may pay higher Annual Allowance charges, but typically only where their projected pension at retirement has increased. Similarly, some members that are already in receipt of their pension may need to pay additional Lifetime Allowance charges when the total value of their pension has increased.
Some members may also face changes in their contribution rates, which may also affect their income tax liabilities.
Where a member’s tax liability does increase, this will not exceed what they would have paid had they always been a member of the scheme they are moving into or receiving equivalent benefits.
What is the compensation scheme and how will it work?
The remedy attempts to put people in the right position directly; but sometimes it cannot, i.e. due to interactions with tax system. Where this happens, compensation arises to redress members.
Compensation payments may be made to pension scheme members via application as a result of overpaid tax charges and where this cannot be repaid directly by HMRC. Where contributions have also been overpaid, schemes will provide direct compensation to members, as well as for instances where members may need independent financial advice to resolve their compensation arrangements. These overpayments would have happened unintentionally through the remedy of the discrimination.