NHS pension annual allowance guide for GPs

Guidance for GPs on the annual allowance - what you need to do to enable NHS Pensions to provide your pension growth figures and what to do if these are not available.
Location: England Wales
Audience: GPs
Updated: Thursday 23 April 2020
Piggybank illustration

Complete your paperwork on time

You must ensure that you complete all appropriate paperwork at the correct time.

All historical forms should be up to date and the 2019/20 type 1 and/or type 2 forms are submitted by no later than 28 February 2021.

If you complete all your paperwork by the deadline then your pension agency should be able to calculate your pension input amounts (growth) for the relevant year.

An annual allowance pension saving statements could be dispatched as early as June or July. This will enable you to amend your tax return, submitted in January, and to pay the tax or to complete a scheme pays election (a request for the scheme to pay the tax for you).

 

If you don’t have an annual allowance statement

If you don’t receive an annual allowance pension saving statement in time, you must estimate your position so that the scheme pays election for 2019/20 is submitted by the deadline. This election can be amended up to 5 April 2024.

NHS Pensions suggest using previous annual allowance statements and annual benefit statements together with a best estimate of your anticipated pensionable earnings for the current year for this.

You can estimate additional accrual for the current year on the following basis:

1995 section 2008 section 2015 scheme
Pensionable salary (£) X 1.4%
=
annual pension earned in year to be multiplied by factor of 19 to give estimated pension growth.
Pensionable salary (£) X 1.87%
=
annual pension earned in year to be multiplied by factor of 16 to give estimated pension growth.
Pensionable salary (£) X 1/54
=
annual pension earned in year to be multiplied by factor of 16 to give estimated pension growth.

Alternatively, you could review your entire position by adding dynamising to previous years’ income (1995/2008 section) and in service revaluation to 2015 scheme benefits and then adding on current accruals. Assistance may be available from a suitably experienced accountant or an independent financial adviser.

 

What to do when you have a statement or have estimated your position

Whether you have received an annual allowance statement from NHS Pensions or you have estimated your own position, you will need to declare any annual allowance tax charge on your self assessment tax return. You will need to either pay the tax directly or tell HMRC you will be paying the tax via scheme pays.

If using scheme pays then you need to complete your scheme pays election form by the deadline. NHS Pensions do not accept late applications for scheme pays. If you are unable to estimate your position a nominal amount of £1 could be added until final details are known.

Pensions tax charges incurred on account of growth in the NHS pension scheme during 2019/20 in England and Wales will be met by NHS England or the Welsh Government. The self assessment and scheme pays deadlines remain.

Read more from NHS England.

In years up to 2019/20 and from 2020/21 members will be responsible for their own pension tax payments.

 

Making a scheme pays election

The deadline for making a scheme pays election for 2019/20 is 31 July 2021 (or earlier if you are due to retire). This deadline is the same for mandatory and voluntary scheme pays.

However, interest begins to be calculated from different dates depending on whether mandatory or voluntary scheme pays is used: 

  • HMRC mandatory scheme pays deducts interest from 14 February (following the election deadline), so for 2019/20 this is from 14 February 2022
  • HMRC voluntary scheme pays deducts interest from 31 January (following the end of the relevant tax year), so for 2019/20 this is from 31 January 2021.

If you are subject to the annual allowance taper, and a pension tax charge is due on your pension growth, which may be between £10,000 and £40,000, you will be making a voluntary scheme pays election to NHS Pensions.

If you paid the tax directly then the deadline for this is 31 January and the tax may be paid before interest is applied to the tax due (assuming NHS Pensions are able to pay your tax charge by 31 January).

If you wait for your annual allowance statement and then pay your tax or you choose scheme pays and submit this election before the deadline in July, you may still be incurring interest on the voluntary scheme pays amount.

A revised scheme pays election form and scheme pays guidance note will be provided by NHS Pensions closer to the deadline.

About scheme pays

Voluntary scheme pays is used if a tax charge is incurred on account of pension growth over the tapered annual allowance (between £10,000 and £40,000 for 2019/20).  

Mandatory scheme pays is used if the tax charge is incurred on account of pension growth which is over the standard annual allowance (£40,000).  

The need to use voluntary scheme pays should decrease going forward as the tapered annual allowance limits have been significantly increased from 2020/21 (threshold income £200,000 and adjusted income £240,000).

 

If you have transitioned into the 2015 scheme

If you have transitioned from the 1995/2008 section into the 2015 scheme, you may see your annual allowance position reviewed on account of the remedy available following the McCloud (age discrimination) ruling. At the moment it is not clear what the outcome to this will be but it may well affect pension input amounts for transitional members.

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