Bentley Independent Financial Advisers is delighted to announce that Charlie Lenton, a Chartered Financial Planner has joined the company. She specialises in NHS pensions and below is her first blog for the company.
The NHS pension scheme has made a change to the scheme rules to permit voluntary scheme pays.
A pension scheme must offer mandatory scheme pays as a mechanism to pay the annual allowance charge if the member has contributed in excess of the standard annual allowance and their annual allowance liability is more than £2,000. There are no minimum criteria for voluntary scheme pays to be used but it is up the to the pension scheme whether they offer it or not.
Which schemes offer voluntary scheme pays has been brought to the fore because of the impact of the tapered annual allowance and the need for the individual to have to meet the annual allowance charge personally, in line with the self-assessment deadlines.
For the NHS schemes (1995/2008 and 2015), voluntary scheme pays is available for the tax years 2015/16 and 2016/17 if the pension input amount in one or both schemes is under the standard annual allowance and the total pension input amount across both schemes is more than the standard annual allowance.
For tax year 2017/2018 onwards, voluntary scheme pays is available if either:
The pension input amount in either the 1995/2008 or 2015 NHS Pension Scheme is under the standard annual allowance but over the tapered or alternative annual allowance
The individual is a member of both schemes and the total pension input amount, from both schemes when added together, is more than the tapered, alternative or standard annual allowance
From tax year 2017/2018 it’s no longer a condition of NHS pension scheme pays that you have an annual allowance charge of more than £2,000, across all your pension schemes.
Members of the NHS pension scheme will need to complete a Scheme Pays Election Notice (SPE2) and return it within HMRC’s deadline of 31 July, in the year following the tax year of the annual allowance charge.
The NHS pensions website is being updated with new forms and guidance material.
The Key Point
In summary, if you have an additional annual allowance charge to pay due to the tapered annual allowance, you will now have the option to use scheme pays for that portion of the annual allowance charge (instead of settling via self-assessment).
You should still assess whether or not scheme pays is the right thing to do, as interest is charged on the amount owing until your retirement date.