Last year, the Government recognised the damage the pensions’ tax system was having on the health service. This resulted in the Chancellor in March 2020, announcing changes to the tapered annual allowance rules.
However, these changes did not come quick enough for those already affected by pension tax charges for the tax year 2019/20. In order to resolve this, NHS England and NHS Wales introduced the annual allowance repayment scheme 2019/20.
Annual allowance compensation scheme 2019/20
The scheme guarantees that any annual allowance tax charge for eligible clinicians will be compensated at the time of retirement.
To be eligible, you must be:
- a clinician who is a member of the NHS England or Wales pension scheme
- have incurred an annual allowance tax charge for 2019/20
- elect to pay this charge via scheme pays – you must not pay this tax bill using cash.
The formal scheme pays deadline has been extended to 31 March 2022. We advise you however, to submit it as soon as possible to minimise the potential for any additional interest charges.
If you are planning to retire before 31 July 2021, you should apply for the compensation before your pension is approved.
NHSBSA will accept scheme pays election forms from members who have already retired but did not make a scheme pays election prior to retirement. This is so long as the application is made prior to 31 July 2021 and is supported by the employer supplementary form.
All such applications will be accepted on a voluntary scheme pays basis only. This means that any interest charges which may apply for late payment will need to be met by the scheme member alone.
How to apply
There are two forms required to access the scheme.
SPE2 scheme pays application form
Deadline: 31 March 2022 for present pension scheme issues.
We have produced a template covering letter that you can also submit alongside the SPE2 form to help you with your claim.
We recommend setting aside a couple of hours to complete the process. You will need your pension savings statements including 19/20 (if issued, and possibly as far back as 2012/13), March payslips and tax returns from 2016/17 to 2019/20 to hand.
2019/20 annual allowance charge compensation policy application form
Deadline: 31 March 2022
If you're unsure if you have a tax charge
If you are not in a position to know whether you have an annual allowance tax charge by the time of the scheme pays deadline, we strongly recommend you put a best estimate of your annual allowance tax bill on the scheme pays election.
Or, you can complete a form with a nominal amount eg £25 (per scheme if you are in more than one scheme).
This will ensure that once the information you need to calculate any tax liability is available, you discover that you have a tax charge to pay, then you will still be able to access the scheme.
You can amend the amount entered on the scheme pays election form up to four years later. However, if you do not submit a scheme pays election you will potentially be ineligible for the scheme if you later find that you have an annual allowance tax bill.
Timeline of deadlines
|31 July 2022||19/20 formal hard scheme pays and annual allowance charge compensation scheme form deadline*|
|October 2023||Deadline for pension schemes to administer changes to legacy AA charges arising during 'legacy' period (2015-2022)|
|31 July 2024||Deadline to amend speculative SPE form|
* The usual scheme pays election deadline is 31 July after the end of the tax year. It has been extended this year to 31 March because of COVID-19.