The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2026

Published: Tue 23rd Jun 26

This instrument modifies the tax treatment of public service pension schemes to facilitate the rectification of unlawful discrimination as required by the Public Service Pensions and Judicial Offices Act 2022.

It amends previous regulations to allow members to submit 'scheme pays' notices digitally via HMRC, extends deadlines for reporting increased tax liabilities, and provides specific tax frameworks for Armed Forces, judicial, and local government pension schemes.

The regulations apply to scheme administrators, His Majesty’s Revenue and Customs (HMRC), and members of public service schemes—including judges and teachers—who are eligible for a discrimination remedy.

Arguments For

The instrument states it is necessary to correct a defect in the Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) (No. 2) Regulations 2023.
The Treasury asserts that these modifications ensure the correct tax treatment for members of public service pension schemes whose benefits are being rectified under the Public Service Pensions and Judicial Offices Act (PSPJOA) 2022.
Proponents argue that the provisions, such as allowing digital submission of scheme pays notices to HMRC, simplify the administrative process for members seeking to manage increased annual allowance tax charges.
The document notes that extending deadlines for scheme pays notices (to July 2027) and information provision provides necessary flexibility for scheme administrators and members (or their representatives) dealing with retrospective adjustments.
The legislation specifies that certain modifications (such as those for Armed Forces and teacher service) must be retrospective (to 2014-15) to align with the period during which the remediable service accrued.

Arguments Against

Legal scholars may note that the complexity of layering multiple sets of 'Rectification of Unlawful Discrimination' tax regulations (2023, No. 2 2023, and 2026) increases the administrative burden on pension scheme managers.
Affected parties might express concern regarding the retrospective nature of the tax modifications, which may require reopening tax assessments dating back to the 2014-15 tax year.
Implementation difficulties may arise from the requirement for HMRC to transmit digital notices to scheme administrators within specific timeframes to determine liability and payment due dates.
Critics may argue that the specific modifications for 'excess teacher service' and judicial 'immediate detriment' create a fragmented tax landscape with varying rules for different categories of public servants.

Part 1 Introductory

Citation, commencement and effect

—(1) These Regulations may be cited as the Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2026.

(2) These Regulations come into force on 14th July 2026 and have effect so as to modify enactments in their application in relation to a relevant person.
(3) Regulations 3, 4 and 14 have effect as if, when the provisions which they amend were made, those provisions contained the amendments made by these Regulations.
(4) Regulations 5 to 8 have effect for the tax year 2023 - 24 and subsequent tax years.
(5) Regulations 9 to 12 and 15 have effect for the tax year 2014 - 15 and subsequent tax years.

This section establishes the official title of the regulations and sets the commencement date as 14 July 2026.

It specifies different effective dates for various parts of the instrument, with several provisions applying retrospectively to the 2014-15 or 2023-24 tax years.

These dates align the tax changes with the periods during which pension discrimination occurred and is being remedied.

Interpretation

—(1) In these Regulations—

'the 2023 Regulations' means the Public Service Pensions Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2023;

'the 2023 (No. 2) Regulations' means the Public Service Pensions Schemes (Rectification of Unlawful Discrimination) (Tax) (No. 2) Regulations 2023.

(2) Other expressions used in these Regulations have the same meaning as in Part 4 of FA 2004 (pension schemes etc), the 2023 Regulations, the 2023 (No. 2) Regulations and PSPJOA 2022.

This section defines the primary references used throughout the document, specifically linking the new rules to the 2023 tax regulations and the Finance Act 2004.

It ensures consistent terminology across the various statutes governing pension taxation and the discrimination remedy.

Part 2 Amendment of the 2023 Regulations

Amendment of regulation 8 of the 2023 Regulations

—(1) Regulation 8 of the 2023 Regulations (Chapter 1 schemes and judicial 2015 schemes: operation of scheme pays for remedy years) is amended as follows.

(2) In paragraph (3), sub-paragraph (b), for paragraph (i) substitute—

'(i) for everything before sub-paragraph (a) there were substituted—

'(3) The individual may give a notice to the scheme administrator of the Chapter 1 scheme or the judicial 2015 scheme (within the meaning of Chapter 1 or Chapter 2 of Part 1 of the Public Service Pensions and Judicial Offices Act 2022), or to His Majesty's Revenue and Customs, by digital means, for onward transmission to the scheme administrator, specifying that the individual and the scheme administrator are to be jointly and severally liable in respect of so much of the annual allowance charge arising in the case of the individual as—'.'.

(3) After paragraph (3), sub-paragraph (e), insert—

'(f) for the purposes of subsection (7), a notice which is given by the individual to HMRC by digital means is treated as having been received by the scheme administrator when HMRC send the notice to the scheme administrator.'.

(4) For paragraph (4) substitute—

'(4) In the application of section 237BA of FA 2004 (time limit for notices under section 237B) in relation to a scheme pays notice given under section 237B of FA 2004 as that section applies by virtue of paragraph (2)(b)—

(a) the reference in subsection (2) of that section to 31st July is to be read as a reference to 6th July 2027;
(b) for the purposes of subsection (2) of that section, a scheme pays notice which is given by the individual to HMRC by digital means is treated as having been given to the scheme administrator at the same time.

(4ZA) In the application of section 254 of FA 2004 (accounting for tax by scheme administrators) in relation to a scheme pays notice given under section 237B of FA 2004 as that section applies by virtue of paragraph (2)(b), for the purposes of subsection (7A) (b), a scheme pays notice which is given by the individual to HMRC by digital means is treated as having been received by the scheme administrator when HMRC send the notice to the scheme administrator.'.

(5) In paragraph (4A), in sub-paragraph (c), omit '5th July 2030 or, where the condition in paragraph (5) is met,'.

(6) Omit paragraphs (5) and (6).

This section permits pension scheme members to submit 'scheme pays' notices—which allow tax charges to be paid from a pension pot—digitally to HMRC rather than directly to the scheme administrator.

It clarifies that while the member meets their deadline when they notify HMRC, the administrator's payment deadline is triggered only when HMRC forwards the notice. The regulation also extends the deadline for members to submit these notices to 6 July 2027.

Amendment of regulation 9 of the 2023 Regulations

—(1) Regulation 9 of the 2023 Regulations (Chapter 1 schemes: operation of scheme pays for 2022-23) is amended as follows.

(2) In sub-paragraph (2)(b), for everything before the text to be treated as substituted for paragraph (a), substitute—

'(b) subsection (3) has effect as if—
(i) in the opening words of that subsection, after 'the individual may give a notice to the scheme administrator of the pension scheme' there were inserted ', or to His Majesty's Revenue and Customs, by digital means, for onward transmission to the scheme administrator,'; and
(ii) for paragraph (a) there were substituted—'.

(3) In paragraph (2), after sub-paragraph (2)(e) insert—

'(f) for the purposes of subsection (7), a notice which is given by the individual to HMRC by digital means is treated as having been received by the scheme administrator when HMRC send the notice to the scheme administrator.'.

(4) For paragraph (3) substitute—

'(3) In the application of section 237BA of FA 2004 in relation to a scheme pays notice given in relation to a Chapter 1 scheme for the tax year 2022-23 by an individual who has any remediable service in any earlier tax year—

(a) the reference in subsection (2) of that section to 31st July is to be read as a reference to 6th July 2027; and
(b) for the purposes of subsection (2) of that section a scheme pays notice which is given by the individual to HMRC by digital means is treated as having been given to the scheme administrator at the same time.

(3ZA) In the application of section 254 of FA 2004 (accounting for tax by scheme administrators) in relation to a scheme pays notice given in relation to a Chapter 1 scheme for the tax year 2022-23 by an individual who has any remediable service in any earlier tax year, for the purposes of subsection (7A)(b), a scheme pays notice which is given by the individual to HMRC by digital means is treated as having been received by the scheme administrator when HMRC send the notice to the scheme administrator.'.

(5) In paragraph (3A), in sub-paragraph (c), omit the words '5th July 2030 or, where the condition in paragraph (4) is met,'.

(6) Omit paragraphs (4) and (5).

This section makes similar amendments to the process for the 2022-23 tax year for members of non-judicial public service schemes.

It enables the use of digital delivery to HMRC for 'scheme pays' notices and sets the submission deadline to 6 July 2027.

This ensures consistency in the administrative treatment of annual allowance charges for that specific transition year.

Part 3 Immediate Detriment - Judicial Schemes

Meaning of 'immediate detriment remedy'

For the purposes of this Part, an immediate detriment remedy has been obtained in relation to a person's remediable service in a judicial office if either of the conditions in section 68 of PSPJOA 2022 (whether an 'immediate detriment remedy' has been obtained) is met.

This defines 'immediate detriment remedy' for the judiciary, referring to cases where pension benefits are already being paid or are about to be paid.

It identifies judges who have already secured a remedy for the discrimination under previous legal frameworks.

Modification of regulation 15 of the 2023 Regulations

—(1) Regulation 15 of the 2023 Regulations (judicial schemes and local government schemes: administrative provisions relating to scheme pays) is modified as follows.

(2) Sub-paragraph (e) of paragraph (1) applies in relation to a person's remediable service in a judicial office where an immediate detriment remedy has been obtained in relation to that service as if, for the words 'a relevant rectification provision' there were substituted 'the application of Part 3 of the Judicial Pensions (Remediable Service etc.) Regulations 2023 (provision where an immediate detriment remedy has already been obtained)'.

This section modifies how judicial pension administrators recover overpaid tax from HMRC. It ensures that administrators can reclaim annual allowance charges that were overpaid because a judge's pension situation was updated via judicial-specific regulations rather than general discrimination remedy provisions.

Modification of regulation 42 of the 2023 Regulations

—(1) Regulation 42 of the 2023 Regulations (transfers from PPA in accordance with PSPJOA 2022 ignored) is modified as follows.

(2) Sub-paragraph (b) of paragraph (2) applies in relation to a person's remediable service in a judicial office where an immediate detriment remedy has been obtained in relation to that service as if, for the words 'section 41 of that Act (transfers from partnership pension accounts)' there were substituted 'regulation 16 of the Judicial Pensions (Remediable Service etc.) Regulations 2023 (partnership pension account: requirement to transfer and surrender rights)'.

This provision protects a judge's 'Fixed Protection 2016' (a tax-free pension allowance status) during a transfer of funds.

It ensures that transferring from a Partnership Pension Account to a judicial scheme under specific judicial regulations does not trigger the loss of that protected tax status.

Modification of regulation 43 of the 2023 Regulations

—(1) Regulation 43 of the 2023 Regulations (transfers from PPA in accordance with PSPJOA 2022 treated as recognised transfers) is modified as follows.

(2) Sub-paragraph (b) of paragraph (2) applies in relation to a person's remediable service in a judicial office where an immediate detriment remedy has been obtained in relation to that service as if, for the words 'section 41 of that Act (requirement to transfer and surrender PPA rights)' there were substituted 'regulation 16 of the Judicial Pensions (Remediable Service etc.) Regulations 2023 (partnership pension account: requirement to transfer and surrender rights)'.

This ensures that the transfer of a judge’s partnership pension rights is legally classified as a 'recognised transfer' under the Finance Act 2004.

This classification prevents the transfer from being treated as an unauthorised payment, which would normally incur heavy tax penalties.

Part 4 Armed Forces

Interpretation of this Part

[Definitions for AFPS 1975, AFPS 2005, EDP 2015, and related terms omit for brevity as per instructions]

This section provides the definitions for various military pension schemes and benefits, such as the Armed Forces Pension Scheme 1975 and the 2015 Early Departure Payments scheme.

These definitions are essential for applying specific tax rules to military personnel choosing between legacy and new pension benefits.

AFPS 1975: election for new scheme benefits

—(1) This regulation applies where—

(a) a section 6 election or a section 10 election is made in relation to an individual's remediable service under the AFPS 1975; and
(b) as a result of that election, new scheme benefits which are equivalent to EDP 2015 benefits are payable in relation to that individual's remediable service under the AFPS 1975 ('EDP 2015 equivalent benefits').

(2) For the purposes of the Pensions Tax Acts—

(a) EDP 2015 equivalent benefits are to be treated as being payable from a separate part of the AFPS 1975 ('the separate part');
(b) the separate part—
(i) is to be treated as an employer-financed retirement benefits scheme which is only liable to pay EDP 2015 equivalent benefits; and
(ii) is to be ignored for the purposes of applying Part 4 of FA 2004 to the AFPS 1975.

(3) EDP 2015 equivalent benefits which are paid in the form of a lump sum are to be treated as a lump sum provided under the EDP 2015 Scheme for the purposes of section 640A of ITEPA 2003.

This regulation addresses cases where AFPS 1975 members choose newer scheme benefits.

It mandates that certain benefits (Early Departure Payments) are treated as originating from a separate 'employer-financed' scheme rather than the main pension scheme, ensuring they are taxed appropriately and do not interfere with the member's annual or lifetime pension tax limits.

AFPS 2005: election for new scheme benefits

—(1) This regulation applies where—

(a) Part 4 of Schedule 3 to the 2005 Order applies to or in respect of an individual in accordance with paragraph 18 of that Part;
(b) a section 6 election is made in relation to an individual's remediable service under the AFPS 2005; and
(c) as a result of that election, benefits which are equivalent to AFPS 1975 benefits are payable in relation to that individual's earlier service from the AFPS 2005 ('AFPS 1975 equivalent benefits') in accordance with paragraph 19 of Part 4 of Schedule 3 to the 2005 Order.

(2) The normal minimum pension age in relation to AFPS 1975 equivalent benefits is treated as being the protected pension age which would have applied to that individual in relation to the AFPS 1975 under paragraph 22 of Schedule 36 to FA 2004, disregarding the operation of Part 4 of Schedule 3 to the 2005 Order.

This section allows military personnel who re-joined and various other AFPS 2005 members to keep their 'protected pension age' from their earlier 1975 service. This allows them to receive certain benefits at an earlier age than the standard minimum pension age without incurring tax charges.

Part 5 Miscellaneous

Minor benefits: trivial commutation lump sum death benefit

—(1) Paragraph (2) applies where—

(a) an individual (D) has been paid a trivial commutation lump sum death benefit,
(b) as a result of the operation of a relevant rectification provision, an amount by way of lump sum ('the additional lump sum') has become payable to D or to D's personal representative under a registered pension scheme,
(c) D has died without having received the additional lump sum,
(d) the additional lump sum is paid to D's personal representative, and
(e) the additional lump sum would have been a trivial commutation lump sum death benefit if—
(i) D had been alive when it was paid, and
(ii) it had been paid to D.

(2) The additional lump sum is to be treated as—

(a) falling within section 164(1) of FA 2004 (authorised member payments), and
(b) a trivial commutation lump sum death benefit paid under a registered pension scheme for the purposes of Part 9 of ITEPA 2003.

This regulation applies when an additional pension payment is due after a member's death because of the discrimination remedy.

It classifies these late payments as 'trivial commutation lump sum death benefits,' which ensures they are treated as authorised tax payments rather than being taxed as unauthorized windfalls.

Voluntary scheme pays - payment of tax where request served

[Provisions for 45-day payment window for voluntary scheme pays requests omit for brevity]

This section sets a strict 45-day deadline for pension scheme administrators to pay tax charges to HMRC after agreeing to a member's 'voluntary scheme pays' request.

It also specifies that digital requests made through HMRC are considered received by the administrator the moment HMRC forwards them.

Amendment of regulation 32 of the 2023 (No. 2) Regulations

—(1) Regulation 32 of the 2023 (No. 2) Regulations (specified information: due date for information) is amended as follows.

(2) For paragraph (3) substitute—

'(3) Where a scheme administrator provides a pension savings statement to or in respect of the specified individual on or after 1st November 2024, the due date for information is—

(a) the date which is three months after the date on which that statement is provided, or
(b) where the specified individual dies within the period of three months beginning with the date on which that statement is provided, the date three months after the date of death.'.

[Subsection (3) regarding November 2026 similar in effect]

This section extends the reporting deadlines when a pension scheme member dies shortly after or before receiving their pension savings statement.

It grants executors or personal representatives an additional three months after the death (or after receiving the statement) to provide the necessary information to HMRC.

Excess teacher service

—(1) This regulation applies where the relevant Chapter 1 legacy scheme in relation to the excess teacher service of an individual ('P') is the local government new scheme by virtue of sections 2(1) and 4(4) of PSPJOA 2022.

(2) A final salary uplift to which P is or may be entitled is to be ignored for the purposes of determining P's pension input amounts for any pension input period.

(3) In this regulation 'final salary uplift' means an increase in the benefits payable to P under regulations 4A to 4V of the Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014.

This regulation concerns teachers who have 'excess service' moved to the Local Government Pension Scheme.

It directs that any 'final salary uplift' (a benefit increase) must be ignored when calculating the person's annual pension growth for tax purposes, preventing an unintended tax charge caused by the administrative shift of their service.

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