HMRC reissue updated McCloud calculation service – just in time for revised pensions savings statements

The calculation service was initially launched at the end of last year but was removed earlier this year to correct errors and improve the functionality.

The McCloud remedy moves the benefits of many members of public sector schemes back from the career average scheme to the final salary scheme for the remedy period. The remedy period covers the seven years between 6 April 2015 and 5 April 2022. For this period, members will be provided with revised pension inputs for the relevant years. For some, mainly higher earners, this may create tax rebates or tax charges. Rebates will only apply to those who have previously paid annual allowance charges either directly or using scheme pays.

Revised pension inputs will also lead to revised adjusted income figures for high earners which in turn may reduce or increase the tapered annual allowance for the relevant years

The updated calculation service has been relaunched just in time for when many members will receive their revised pensions saving statements which are due by the end of October 2024.

To use the service clients will need:

• details of their total taxable income, adjusted income and threshold income. However, if clients do not have these figures, they will be asked to give the information needed to calculate them.
• pension savings statements, including the revised post McCloud statements.
• details of their personal allowance for tax years 2015/2016 to 2022/2023.
• self-assessment tax returns, if applicable, including details of any annual allowance or lifetime allowance charges previously paid.
• retirement statement or a benefit crystallisation event statement, if applicable.

Triage or “Before your start”

Whilst the number of members impacted by the remedy will be vast, only a small percentage of these will have a change in tax position. Therefore, HMRC have also included a triage process to help members decide whether they need to use the full calculator and submission service or not.  This is available here.

What does this mean for advisers?

The calculation service is welcome in theory as it should allow members to calculate their revised annual allowance charges and rebates themselves. However, in reality, clients are still likely to need assistance with using the calculator, understanding the relevant inputs and providing the correct information to HMRC. For those that have paid annual allowance charges in the past there may be an opportunity to receive a tax rebate and so it is important that clients get this right. 

Just as importantly, will be helping to reassure and explain to the many public sector member clients who will receive their revised pension input statement and will not be impacted.