DB pension input amounts and the CPI revaluation step everyone gets wrong

The pension input amount for a defined-benefit arrangement is not what the member or employer paid in. It is the increase in the capitalised valueof the member's accrued benefits over the pension input period. Get the valuation factor right but skip one statutory step — the CPI uprating of the opening value — and the input amount comes out too high. Every figure downstream of it inherits the error: the annual-allowance excess, the charge, and, for a member near a tapered-allowance threshold, the taper test itself. The direction of the error is the worst possible for compliance software: it manufactures a charge that is not due.

The rule

Two ingredients. First, the capital value. A DB benefit is converted to a capital value using a factor of 16: the capital value is 16 × (annual pension) plus any separate lump sum. This 16× factor is set out at PTM053100 and is not in dispute. Compute it at the start of the pension input period (the opening value) and at the end (the closing value).

Second — and this is the step that is skipped — the opening value is uprated by the increase in the Consumer Prices Index before it is subtracted from the closing value. You do not subtract the raw opening value. You subtract the opening value after revaluing it by the 12-month CPI figure to the September before the start of the tax year. The governing statute is Finance Act 2004 section 235, and PTM053301 sets out the opening-value steps that implement it.

The reason is conceptual. The annual allowance is meant to measure realgrowth in a member's benefits — growth above inflation. A benefit that merely keeps pace with CPI has not grown in real terms, and should produce little or no pension input amount. Subtracting the raw opening value treats inflationary uplift as if it were real accrual, and over-states the input. Uprating the opening value by CPI nets the inflation out, leaving only the real increase.

A worked example

HMRC's own worked example in PTM053301 (“Fiona”) makes the arithmetic — and one precision trap — concrete. Fiona's opening capital value is £207,817.28. CPI for the relevant September is 3%. Her closing capital value is £243,265.76.

Notice the uplift. £207,817.28 × 3% is £6,234.5184. HMRC takes £6,234.51 — it truncatesto the penny, it does not round half-up. Round half-up and you get £6,234.52, a revalued opening of £214,051.80, and a pension input amount of £29,213.96 — a penny short of HMRC's published £29,213.97. The example only reconciles with the truncated figure. So the CPI increment is floored to the penny; it is the one deliberate departure from the usual half-up convention, scoped to this statutory step and justified by HMRC's own worked answer. ParaplanAI computes the uplift in integer pence and floors it, precisely so a £243,265.76 closing value cannot land a penny adrift of HMRC.

A second case, this time from the engine's own corpus (row PTM-EX-09), shows the figures for a current tax year. An opening capital value of £105,000 — 16 × a £5,000 annual pension, plus a £25,000 separate automatic lump sum at face value (the 16× factor applies to the pension only; a separate automatic lump is already a capital amount, so it is added at 1×, not 16× — PTM053100 / FA 2004 s.234 / ADR-035) — is uprated by the 1.7% CPI that applies for 2025/26 (the September 2024 figure), giving £1,785 of uplift and a revalued opening of £106,785. Against a £115,000 closing value, the pension input amount is £8,215.

Subtract the raw £105,000 instead of the revalued £106,785 and the input amount comes out as £10,000 — an over-statement of £1,785, the entire CPI uplift, on a single member in a single year. In the high-inflation years the gap is larger still: CPI was 10.1% for 2023/24 and 6.7% for 2024/25.

The common error

The error is to compute the input amount as closing value minus raw opening value, with no CPI uplift. It is an easy omission — the 16× factor feels like the hard part, and once it is right the subtraction looks trivial. But missing the s.235 uprating makes the opening value too small, so the difference is too large, so the pension input amount, the annual-allowance excess, and the charge are all over-stated. This is not a rounding quibble; on a large DB benefit in a high-CPI year it is thousands of pounds of phantom pension saving.

There is a corner case worth stating because it is a frequent over-correction. If CPI fell over the relevant year, you do not reduce the opening value. Section 235(3) sets the appropriate percentage as the amount by which September CPI is higher than the previous September — “if any”. A fall in CPI gives a nil uprating, never a downward revaluation. The revaluation rate is therefore always at or above zero, and the pension input amount is floored at zero (a benefit that grew by less than CPI produces a £0 input, not a negative one).

ParaplanAI holds the September CPI figure for each tax year in versioned configuration, in basis points, never as a literal in a calculation function, and the calculator surfaces the full opening → revalued-opening → input working with the CPI rate and the s.235 citation, so the inflation step is visible rather than buried. This article is, in effect, the public statement of a fix the engine itself needed: the revaluation step is documented in ADR-027.

The citation

The 16× capital-valuation factor is at PTM053100. The opening-value steps, including the CPI uprating and the worked “Fiona” example, are at PTM053301. The governing statute is Finance Act 2004, section 235 (“uprating of opening value”), whose subsection (3) carries the load-bearing “if any” that fixes the negative-CPI question. The September CPI 12-month rates are the ONS D7G7 series. The engine's reading, the truncation convention, and the per-tax-year CPI mapping are documented in ADR-027.

PTM053100 · PTM053301 · FA 2004 s.235(3) · ONS CPI series D7G7 · engine reading ADR-027