Part 1: Public Service Pension Schemes Chapter 1: Schemes other than Judicial Schemes and Local Government Schemes Section 18: Powers to reduce or waive liabilities
Section 18 provides that scheme regulations for a legacy scheme may make provision whereby a liability on an individual to repay overpaid benefits (section 14) or to pay an amount in respect of underpaid contributions (section 15, 16 or 17) is reduced or waived. This power is intended to allow schemes discretion where sums are owed to schemes by members as a result of corrections made under section 14, 15 ,16 or 17. For example, where a pensioner member has been overpaid their pension benefit and reimbursing the pension scheme would cause hardship, the pension scheme could write off part of the liability. Similarly, section 18 provides that scheme regulations for a legacy scheme may make provision where a scheme manager has a liability to pay compensation to a member under section 15, 16 or 17, to either reduce that amount to reflect excessive tax relief or, with respect to amounts owed under section 16, by agreement with the member, waive it entirely.
	Section 18(1) allows scheme regulations to make provisions to reduce or waive a liability owed by a person to the scheme under section 14.
	Section 18(2) allows schemes to make provisions to reduce or waive a liability owed by a person to the scheme under section 15, 16 or 17.
	Section 18(3) and 18(4) envisage that scheme regulations may include provision that reduces liabilities by tax relief amounts. This reflects the fact that payments due under this Chapter may be made at a different time to when they would have been made if the member had always been entitled to the pension benefits that they choose to receive and, as a result, might have received different tax treatment. For example, where a member would have been entitled to tax relief if payments had been made in a different tax year, but has lower taxable income at the time the payment is actually made (e.g. because their earnings are below the personal allowance) or if a member is no longer active, they will not be eligible for tax relief. Under this provision, scheme regulations can reflect that and reduce the liability accordingly.
	Section 18(5) to 18(7) envisage that schemes may reduce or waive compensation owed by the scheme to individuals under section 15, 16 or 17. In particular, it is intended that the compensation may be reduced to reflect tax relief amounts. The policy intent of these sections is to ensure that where a member is either returned to the legacy scheme under section 2 or makes an election to receive new scheme benefits under section 6 or 10, they are returned to the correct net position with respect to contributions and tax relief.
	Section 15, 16 and 17 correct the member’s contributions position by either allowing the scheme to pay compensation where there has been an overpayment of contributions or requiring a payment from the member to make up for underpaid contributions. These sections ensure that the member’s position is corrected for any excess tax relief received for contributions that were historically paid. For example, where a member has previously overpaid contributions, they will be due compensation from the scheme. However, they will have received excessive tax relief on the higher amount. This section allows schemes to reduce the compensation paid to the member by the amount of the excess tax relief to ensure that the member is returned to the correct position with regards to their contributions and tax relief.
	Section 18(8) provides that scheme regulations may make provision to reduce or waive, with the member’s agreement, any liability for the scheme to pay members compensation in relation to overpaid contributions under section 16. The purpose of this is to allow members to defer any correction to their contributions position until the point their benefits are paid and their choice of legacy or new scheme benefits is known, thereby avoiding the need to correct the contributions position twice where the member envisages electing to receive new scheme benefits in the future.