The Calculation Date to be used when calculating the pension and lump sum offsets will depend on the Pension Input Period (PIP) in which the tax charge occurs.

From the 2016/17 financial year onwards, the Pension Input Period has been aligned to financial year i.e. the last day of the PIP is now 31 March each year.

The process for calculating the offsets will vary depending on whether the member has already retired or not at the Calculation Date. The process for each is described in the subsections below.

The pension and lump sum offsets at the Calculation Date will be calculated as described in Calculation of the pension and lump sum offset at the Calculation Date.

At retirement the pension and lump sum offsets may be adjusted to allow for whether the member retired before or after their Normal Pension Age (NPA). The adjustment to be made is described in Adjusting pension offsets at retirement.

Our understanding is that where members have already had their benefits put into payment, the scheme is not obliged to offer the option of scheme pays on a mandatory basis but can offer it on a voluntary basis. DoF have requested that GAD provide guidance on how the scheme pays offset should be calculated for such cases.

Calculation of the pension offset for members who retired on or before the Calculation Date describes how the offset should be calculated for such cases.

The pension and lump sum offsets should have inflation increases (assumed to be in line with the normal revaluation of deferred benefits within the scheme, currently Consumer Prices Index (CPI)) applied during the period between the Calculation Date and the member's eventual retirement.

The benefits payable to a spouse, civil partner or other partner who is eligible to receive a pension on the member's death will not be reduced as a result of the scheme pays mechanism. This will apply regardless of whether the member dies during active service, in deferment or after retirement.

No offset will be applied to children's pensions.

No offset will be made to the lump sum payable to an active member who dies in service.

Lump sum awards which are determined as a multiple of pension and are payable on the death of a deferred member or pensioner member should be based on the pension after any scheme pays offset has been applied.

Options available at retirement, such as commutation or pension allocation, should be based on the residual pension after any scheme pays offset has been applied.

Pension offsets do not affect Guaranteed Minimum Pensions (GMPs) or National Insurance (NI) Modifications.

Where a member 'buys out' the early retirement adjustment to their pension, the pension offset should still be reduced.

Administrators should store the offset along with the Calculation Date on the member's record. Where a member has multiple pension offsets, they should be recorded separately.

If the member leaves the scheme prior to receipt of their pension, the offset should be treated in the same way as a pension debit following divorce (except that the scheme pays offset applies to member benefits only). In particular, our understanding is that if the member leaves with a Club transfer then the scheme pays offset will be preserved in the receiving scheme.

Some members may breach the Annual Allowance on more than one occasion during their careers. Since there is no limit on the number of times a member may opt to utilise scheme pays (subject to usual eligibility), a member may also have multiple Annual Allowance scheme pays offsets. In this circumstance each offset should be considered separately and treated in accordance with this guidance.

It is our understanding from HM Treasury's initial documentation prepared during the development of the revised Annual Allowance regime, that costs incurred by the authorities in relation to operating the scheme pays mechanism may not be recovered from the member concerned.