Universities Superannuation Scheme (USS) - Pensions tax changes: options for USS members
2 February 2012
Members of pension schemes in the UK benefit from tax relief on contributions paid in and are also able to draw part of their retirement benefits as a tax-free lump sum on retirement.
There are however limits to the maximum benefit you can build up in any one year and the maximum benefits you can draw at retirement; The Annual Allowance (AA) reduced from £255,000 to £50,000 from 6 April 2011 and the Lifetime Allowance (LTA) reduces from £1.8 million to £1.5 million from 6 April 2012. Benefits in excess of those limits are subject to a tax charge. The lower AA & LTA limits will most likely, although not exclusively, affect high earning staff. Briefing sessions have been held for those who are considered to be at risk of being impacted by the changes to the limits.
The Government has encouraged pension schemes to introduce amendments to scheme benefits so that tax charges which may arise due to a breach of the LTA or AA do not fall due or are reduced.
The Joint Negotiating Committee (JNC) and the USS Trustee Board have recently agreed changes to the scheme to provide options for members who wish to mitigate the impact of changes by the Revenue to the pensions tax rules, as set out in the New Pension Options for Members.
All the options are available to be used by members of the Final Salary section with immediate effect. Whilst higher earning members will be the ones most at risk of incurring a tax charge under the revised arrangements, there are circumstances which could give rise to tax charges for other groups.
Information about the options to avoid/mitigate tax charges, together with related resources, documents and USS tax option forms requiring your completion, is available here.
There are some important time limitations, particularly with the Enhanced Opting-out option; Fixed Protection elections needing to be made to HM Revenue and Customs (HMRC) by 5 April 2012. This is an HMRC requirement and is regrettably beyond UCL's control.
Further general information, about Tax Relief Limits is available here.
Pensions Manager, Human Resources Division