The Joint Negotiating Committee and the trustee board have agreed changes to the scheme to provide options for members who wish to mitigate the impact of changes by HM Revenue & Customs (HMRC) to the pensions tax rules.
The changes, which will only affect a relatively small proportion of scheme members, involve a reduction in what is referred to as the ‘annual allowance’ from £255,000 per annum to £50,000 per annum from 6 April 2011, and similarly a reduction in the ‘lifetime allowance’ from £1.8 million to £1.5 million with effect from 6 April 2012.
In response to these changes, which can be very significant for those affected, USS has introduced scheme changes to provide members with three possible options in order that they might reduce or eliminate their liability to a tax charge.
Importantly, however, there are no easy solutions available and the options that have been made available result in reductions to the scheme benefits that accrue during a year – in that way a member’s liability to tax can be reduced. We would emphasise that the Revenue’s tax changes affect a very small minority of members, and the suitability of any of the available options will depend upon a member’s individual circumstances. We would encourage members to seek independent financial advice.
There are some important time limitations which need to be taken into account for members who are considering – or indeed have already elected for – the Revenue’s new facility known as ‘fixed protection’. This facility, which is generally for members with very large pension values, can only apply where the member makes an election with the Revenue on or before 5 April 2012, and those interested in this are likely to find that USS’s “enhanced opting-out” option will be of interest. However, members have very little time left to make an election, and they should therefore consider this issue as soon as possible.
Information on the Revenue’s tax changes – together with detailed information on the new options – can be found within this website under the 'Tax relief limits' section.
You will also find a list of USS contacts who will be able to assist members should they have any further queries or indeed should they require any benefit calculations here.