DB pension input amounts: the CPI step that’s easy to miss

The pension input amount for a defined-benefit arrangement isn't what the member or employer paid in. It's the increase in the capitalised value of 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. The annual-allowance excess, the charge and, for a member near a taper threshold, the taper test itself all inherit the error. It errs in the dangerous direction too: it manufactures a charge that isn't 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. The 16× factor is set out at PTM053301 (Step 2: “Multiply the annual amount of that pension by 16”) and in FA 2004 s.234(4)–(5), and isn't in dispute. You compute it at the start of the pension input period (the opening value) and again at the end (the closing value).

Second — and here's the step that gets skipped — the opening value is uprated by the increase in the Consumer Prices Index before it's subtracted from the closing value. You don't 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 statute is Finance Act 2004 section 235, and PTM053301 sets out the opening-value steps that implement it.

The annual allowance measures real growth in a member's benefits — growth above inflation. A benefit that merely keeps pace with CPI hasn't grown in real terms, and should produce little or no pension input amount. Subtract the raw opening value and you treat inflationary uplift as if it were real accrual, over-stating the input. Uprating 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's published revalued opening of £214,051.79 implies an uplift of £6,234.51 — truncated to the penny rather than rounded half-up (HMRC does not state a rounding rule). 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's 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 can't land a penny adrift of HMRC.

A second case, one of the worked cases our DB calculator is tested against, shows the figures for a recent tax year (2025/26). 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× — PTM053301 Step 3 / FA 2004 s.234) — 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.

One caution before you try it below. The worked case above is a 2025/26 one, so it uses the September 2024 CPI of 1.7%. The rate is not a constant: the figure in force for the current 2026/27 year is 3.8% (September 2025, ONS series D7G7), which on the same £105,000 opening value would give £3,990 of uplift rather than £1,785 — more than twice as much, on identical benefits. Always take the September CPI for the year you are computing, never the one you last used.

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 computing the input amount as closing value minus raw opening value, with no CPI uplift. The 16× factor feels like the hard part, and once that's right the subtraction looks trivial. But miss the s.235 uprating and the opening value is 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 isn't a rounding quibble. On a large DB benefit in a high-CPI year it's thousands of pounds of phantom pension saving.

One corner case worth stating, because it's a frequent over-correction. If CPI fell over the relevant year, you don't 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. So the revaluation rate is 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 — never as a literal in a calculation function — and the DB pension input amount calculator shows 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.

The citation

The 16× capital-valuation factor is at PTM053301 (Step 2) and FA 2004 s.234(4)–(5); PTM053100 is HMRC's overview of how pension input amounts are valued for each type of arrangement. 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.

PTM053301 · FA 2004 s.234 · FA 2004 s.235(3) · PTM053100 · ONS CPI series D7G7