Part 4: Income tax, corporation tax and capital gains tax Section 23 and Schedule 4: Pensions: annual allowance Details of the section and Schedule 4 Part 3: Calculation of pension input amounts for periods ending in 2015-16
Part 3 alters how pension savings are measured against the annual allowance for defined benefit and cash balance arrangements for 2015-16. It amends the existing rules to make it easier for scheme administrators to calculate pension savings by preventing the need to carry out valuations on 8 July 2015 and certain other dates.
	Paragraph 8 inserts new subsection (5) into section 229 of FA 2004. This provides that existing subsection (2) is subject to new section 237ZA.
	Paragraph 9 inserts new section 237ZA into FA 2004. This modifies the rules on how the pension input amount, which is the amount of an individual's pension savings, is calculated for defined benefit and cash balance arrangements for 2015-16. For hybrid arrangements the rules are also modified although how this works will depend on whether the arrangement could provide defined benefit or cash balance benefits or both as set out in section 237 of FA 2004.
	New subsection (3) sets out that the pension input amount for the pre-alignment tax year and the post-alignment tax year will be a proportionate amount ('the time apportioned percentage') of the pension input amount for 2015-16. This is calculated as if there had been one single pension input period ('the combined period') ending in 2015-16. The combined period includes all the pension input periods ending in either the pre-alignment tax year or the post-alignment tax year.
	New subsection (4) amends the calculation of the pension input amount for the purposes of the combined period. It provides that the opening value of an individual's pension rights is uprated by 2.5% rather than the CPI figure for September 2014 which was 1.2%. This is intended to be a reasonable adjustment as the combined period could be up to almost two years. Therefore, it would not be appropriate to continue to use the September 2014 CPI figure. Subsection (4) also makes similar amendments to the relevant percentage which is used to determine the maximum amount that a pension can increase for a deferred member during a pension input period, without being tested against the annual allowance.
	New subsection (5) sets out the time-apportioned percentages which are applied to the pension input amount for the combined period, to determine the pension input amounts for the pre and post-alignment tax years. For the post-alignment tax year this is 272 (the number of days from 9 July 2015 to 5 April 2016 inclusive) divided by the number of days in the combined period multiplied by 100. The time apportioned percentage for the pre-alignment tax year is 100 less the time apportioned percentage for the post-alignment tax year.
	New subsections (7A) to (9) apply where an individual became a deferred member of an arrangement in a pension input period that ended between 6 April 2015 and 7 July 2015, and remains a deferred member for the remainder of 2015-16. Where this applies their pension input amount for the post-alignment tax year will be nil.
	New subsection (10) and (14) modify new subsections (3) to (5) so that where an individual would have been a deferred member for a pension input period, but for these changes, then they are treated as being a deferred member from the date the last pension input period in which they were an active member ended, and the time-apportioned percentage is adjusted accordingly. This ensures that scheme administrators do not in these circumstances have to carry out a value of pension savings at 5 April 2016.
	New subsection (15) modifies the calculation of the time-apportioned percentage for new arrangements set up after 8 July, so that the whole of any pension input amount tested in the post-alignment tax year.
	New subsection (15) applies where an individual takes all their benefits from an arrangement before 9 July 2015. Where this applies their pension input amount for the post-alignment tax year will be nil. As a consequence, all savings in that arrangement will be tested against the annual allowance for the pre-alignment tax year.
	New subsections (16) to (18) modify new subsections (3) to (5) to ensure that where a member would have had a nil pension input amount for either the pre-alignment or post-alignment tax year had a calculation been carried out for that period, the time-apportioned percentage is 0% for the mini tax year that would have had a nil pension input amount and 100% for the other tax mini tax year. It does not apply if any of subsections (8) to (11) apply.