Any changes to your pension mean you will need to review your tax position too.
Following our review of pensions for unequal GMPs, some pensioners may receive a one-off additional payment to make up for pension they should have received in previous years.
If this applies to you, we will write to let you know. However, we are writing to people in stages, starting in Spring 2022. We hope to contact everyone by Summer 2024.
You only need to read on if you have now received a one-off additional payment.
Reclaiming income tax
The additional payment will be a one-off extra amount of money in your pension, so it could push you up into a higher income tax band temporarily. As a result, you might have to pay more tax this year than if you had received the right level of pension first time round.
However, you can claim this extra tax back from HM Revenue & Customs (HMRC).
To make a claim:
- If we haven’t already sent you a ‘GMP Detailed statement’, you can download this from ePA or you can contact the Barclays Team at Willis Towers Watson and ask for a ‘GMP Detailed statement’. This will include two copies of a table showing your pension underpayments in each tax year.
- Write to HMRC using our letter template, and enclose one copy of the underpayments table from the ‘GMP Detailed statement’.
- HMRC will respond to your letter.
Please note: As it is your responsibility to keep an eye on your tax position, you must write to HMRC yourself – we cannot make the claim on your behalf.
Guidance on GMP equalisation and the Lifetime Allowance
The information in this guide applies to pensioners of the Barclays Bank UK Retirement Fund (UKRF)
Following our review of pensions for unequal GMPs, some members may receive an increase to their pension, a one-off additional payment or both.
If this applies to you, we will write to let you know. However, we are writing to people in stages, starting in Spring 2022. We hope to contact everyone by Summer 2024.
This guide is about the effect that any pension increase or one-off additional payment (or both) may have on a member’s Lifetime Allowance. So, you only need to read on if we have contacted you and:
- You started receiving your UKRF retirement savings on or after 6 April 2006 (when the Lifetime Allowance was introduced); or
- You started receiving your UKRF retirement savings before 6 April 2006 but started receiving other retirement savings on or after 6 April 2006.
Lifetime Allowance: a reminder
The Lifetime Allowance applies to the overall value of UK pension benefits (apart from the State Pension) you can build up free of tax over your working life. At the point that you first take your benefits, they are tested against the Lifetime Allowance. If you go over it, you will have to pay an extra tax charge on the amount above the allowance.
Please note: It is your responsibility to check whether or not your benefits go over any HM Revenue & Customs tax allowances.
The letter we sent you setting out the impact of our review on your UKRF pension shows the revised percentage of the Lifetime Allowance that your UKRF benefits use up.
This table shows the Lifetime Allowance, so you can check what it was in the year you retired:
| Tax year | LTA |
|---|---|
| Tax year2006/2007 | LTA£1,500,000 |
| Tax year2007/2008 | LTA£1,600,000 |
| Tax year2008/2009 | LTA£1,650,000 |
| Tax year2009/2010 | LTA£1,750,000 |
| Tax year2010/2011 | LTA£1,800,000 |
| Tax year2011/2012 | LTA£1,800,000 |
| Tax year2012/2013 | LTA£1,500,000 |
| Tax year2013/2014 | LTA£1,500,000 |
| Tax year2014/2015 | LTA£1,250,000 |
| Tax year2015/2016 | LTA£1,250,000 |
| Tax year2016/2017 | LTA£1,000,000 |
| Tax year2017/2018 | LTA£1,000,000 |
| Tax year2018/2019 | LTA£1,030.000 |
| Tax year2019/2020 | LTA£1,055,000 |
| Tax year2020/2021 | LTA£1,073,100 |
| Tax year2021/2022 | LTA£1,073,100 |
| Tax year2022/2023 | LTA£1,073,100 |
| Tax year2023/2024 | LTA£1,073,100 |
In the Budget on 15 March 2023, the Government announced a removal of the Lifetime Allowance tax charge for members retiring from 6 April 2023 and the intention to abolish the Lifetime Allowance from 6 April 2024.
How GMP equalisation affects the Lifetime Allowance percentage
If you receive an additional payment, and some or all of it is because your pension should have been higher due to unequal GMPs, the percentage of Lifetime Allowance you used up may change. In addition, if the increase is more than a permitted maximum, this may also affect your Lifetime Allowance.
Remember – you can see the updated percentage on the letter we sent you previously.
Extra tax charge
The ‘Lifetime Allowance charge’ is an extra tax charge of 25% – on top of your own highest tax rate – on the benefits you have built up above the Allowance.
If you are already over 100% of the Lifetime Allowance, the Barclays Team will take the charge from your benefits before making any payment. The charge will then be paid to HMRC automatically.
If we identify from your UKRF benefits that your additional payment takes you over the Lifetime Allowance, we will make this clear when we write to you. We will write to all members whose Lifetime Allowance percentage is 90% or higher with a form asking you to confirm whether benefits you may have in other UK pension schemes would take you over 100% of the Lifetime Allowance. Once we receive your form, we will organise the payment at the next earliest pensioner payroll date.
Even if your UKRF benefits are still below the Lifetime Allowance – that is, your percentage is still less than 100% – you may need to check whether or not you have benefits in other UK pension schemes that could take you over the relevant limit. If so:
- Find the Lifetime Allowance percentages of your benefits due from all your UK pension schemes and add them together.
- If your total is over 100%, you must tell the administrators of all the UK pension schemes – including the Barclays Team – and contact HMRC to let them know (find out more on the Government website).
Example members
Here are four examples of members who might be affected by the Lifetime Allowance in these circumstances.
Rita
Rita has UKRF benefits already over the Lifetime Allowance. Her review shows that she should have received a higher pension from the date she retired, so she receives an additional payment from the UKRF.
- The Barclays Team will take the extra Lifetime Allowance charge (along with any other tax) from Rita’s pension payment.
- The Barclays Team will not take tax from the interest included in Rita’s additional payment. Rita will be responsible for paying the tax on this interest.
- Rita must let HMRC know about the change to her Lifetime Allowance position (using the contact details below).
David
David has UKRF benefits making up 90% of the Lifetime Allowance. This percentage would go up to 95% after he’s received his additional payment.
- The Barclays Team sends David a ‘GMP review and Lifetime Allowance statement’ to fill in and return.
- David does have benefits in other schemes. He checks their Lifetime Allowance percentages and calculates that the total is now over 100%.
- David fills in the ‘GMP review and Lifetime Allowance statement’ and sends it back to the Barclays Team.
- He must also let all the scheme administrators of his other UK pension schemes and HMRC know that he is now over the Lifetime Allowance.
- The Barclays Team will then take any extra Lifetime Allowance charge (along with any other tax) from David’s pension payment.
- The Barclays Team will not take tax from the interest included in David’s additional payment. David will be responsible for paying the tax on this interest.
Stuart
Stuart has UKRF benefits making up 79% of the Lifetime Allowance. This percentage would go up to 81% after he’s received his additional payment. But Stuart also has benefits in other schemes (which he’s told the Barclays Team about) and these make up 20% of the Lifetime Allowance. This means he now has benefits over his Lifetime Allowance and is therefore subject to an extra tax charge.
- The Barclays Team sends Stuart a ‘GMP review and Lifetime Allowance statement’ to fill in and return.
- He checks the Lifetime Allowance percentages of his benefits in other schemes and calculates that the total is now over 100%.
- Stuart fills in the ‘GMP review and Lifetime Allowance statement’ and sends it back to the Barclays Team.
- He must also let all the scheme administrators of his other UK pension schemes and HMRC know that he is now over the Lifetime Allowance.
- The Barclays Team will then take the extra Lifetime Allowance charge (along with any other tax) from Stuart’s future pension payment.
- The Barclays Team will not take tax from the interest included in Stuart’s additional payment. Stuart will be responsible for paying the tax on this interest.
Nasrin
Nasrin has UKRF benefits making up 88% of the Lifetime Allowance. This percentage goes up to 90% when she receives her additional payment.
- Nasrin does not have any benefits in other schemes. This means she is still below the Lifetime Allowance, so there is no Lifetime Allowance charge to pay.
- The Barclays Team will continue to take tax from Nasrin’s pension payment in the usual way.
- The Barclays Team will not take tax from the interest included in Nasrin’s additional payment. Nasrin will be responsible for paying the tax on this interest.
Finding out more
For more details about the Lifetime Allowance, please visit the Government website.
You can get in touch with the Barclays Team using the ‘Contact us’ link at the top of the page.
If needed, you can download from ePA a ‘GMP Detailed statement’ with a detailed breakdown of your underpayment year by year, or you can request this from the Barclays Team.
If you have a question about your individual tax situation, please call HMRC (the helpline number is 0300 123 1079), with your ‘GMP Detailed statement’ to hand. The tax office address is: HM Revenue & Customs, Pay As You Earn & Self-Assessment, BX9 1AS.
If your pension increase or additional payment (or both) means you are affected by the Lifetime Allowance and you are not sure what to do, please take impartial financial advice. You can find support with finding an adviser on the MoneyHelper website.