For many, obtaining records from the pension’s agency has its challenges to say the least. In turn, this creates personal challenges in calculating pension charges and planning for retirement.
This knowledge bite will focus on the NHS scheme pays election. In doing so, please note that in order for one’s pension charges to be calculated accurately – one should obtain the most up to date total reward statement and the annual allowance growth figures annually.
These can be obtained by:
- Registering with https://www.totalrewardstatements.nhs.uk/. You will be able to access the latest total reward statement, which for GP’s should be March 2019.
- Contacting the pension agency on 01253 774 774 requesting the annual allowance growth figures, ideally for the last 7 years. They may be able to provide this over the phone if previously sent or a request will be logged for hard copies to be sent within 3 months – hopefully!
Scheme Pays Election
If you want the NHS to pay your annual allowance pension charge to HMRC, you need to ensure you have completed the Scheme Pays Election (SPE2) by the end of next month, 31st July 2020. Below are the salient points in respect of scheme:
- If your pension input amount in the 1995/2008 or 2015 NHS Pension Scheme is more than the standard annual allowance (£40,000) and your overall charge is more than £2,000, you may request for Scheme Pays (where the NHS Pension pays the tax liability).
- The important thing to note here is that it is not the reduced allowance that needs to be exceeded if an individual is subject to tapering but the full £40,000 allowance. This means that the NHS Pension scheme will only pay the tax charge on the excess over £40,000.
- In return for the NHS paying your charge to HMRC your NHS benefits will be permanently reduced when they are paid to you or if you leave and transfer out.
- If NHS pay some or all your annual allowance charge using their voluntary scheme pays facility, you need to be aware that you will remain solely liable for the charge until it is paid. The NHS will not share your liability for the charge – you alone are responsible for any interest or penalty HMRC may charge if the charge is paid after the tax bill deadline of 31 January.
Our View
The scheme pays election most definitely helps from a cashflow point of view but does impact the benefits on retirement, for both the pension and lump sum. The form is irrevocable and interest is charged from the point the scheme pays is accepted to the point of retirement. Accordingly, we strongly recommend that you speak with your financial advisor before electing for this service.