Pension Saving Statements - Important Advice

For doctors who have received Pension Savings Statements from NHS Pensions it is important to recognise what, and what not, to look out for. And above all, what action is required?

If you have received a Pension Savings Statement it generally means that your NHS Pension benefits have grown by more than the Annual Allowance and you may be liable for a tax charge. Remember it is ultimately your responsiblity to calculate and pay the correct amount of tax due - Neither NHS Pensions or your employer are unable to work this out on your behalf. 

The Annual Allowance

The Annual Allowance is set by HMRC and is the maximum amount of tax free growth in a doctor's pension savings over the course of a tax year. If the limit is exceeded in any one tax year - then a tax charge may be payable.

The Annual Allowance is currently £40,000 per year and for doctors it is broadly the growth in your NHS Pension Scheme  benefits in the tax year (not the amount you have actually contributed).

It must be remembered that the majority of doctors will not be affected by the Annual Allowance charge however you may be affected if:

- You have a significant pay rise in one tax year or you win a Clinical Excellence Award

- You are purchasing Additional Pension, Added Years, Additional Voluntary Contributions or you are making private pension contributions

- You have a significant increase in service like for instance if you have Mental Health Officer status and are getting double years

If you require help on calculating your pension growth (from all pensions not just the NHS Pension Scheme) compared to the Annual Allowance then please do get in touch on richard.higgs@wealthwestmedical.co.uk or telephone 0117 966 5699.

Exceeding The Annual Allowance

If you have exceeded the Annual Allowance then there may be a tax charge to pay. The tax payable will be the marginal rate of tax you pay if you add your excess pension contribution to all of your other income.

If you have unused Annual Allowances from the previous 3 tax years it may be possible to carry-forward these allowances to the current tax year to off-set this year's potential Annual Allowance charge.

If after using carry-forward above, you still have an Annual Allowance tax charge then this must be calculated and then declared and paid over to HMRC. This can be processed via your annual Self-Assessment tax return to HMRC or you can use 'Scheme Pays'. Scheme Pays is a special arrangement whereby you can allow NHS Pensions to pay the Annual Allowance tax charge in return for a permanent reduction in your pension benefits.

Scheme Pays Facility

NHS Pensions will accept a 'Scheme Pays' application as long as it is received by 31st July in the year following the tax year being assessed. Therefore if you have an Annual Allowance charge for tax year 2014-15 then the Scheme Pays application must be in by 31st July 2016.

In addition, the Annual Allowance charge must exceed £2,000 in order for you to be able to apply for Scheme Pays.

It must be remembered that using Scheme Pays means permanently reducing your NHS Pension benefits in order to pay for it. The arrangement is in effect a loan to you to pay for the tax charge and the rate of interest is CPI + 3%.

If you would like an appraisal of whether Scheme Pays should be used in your particular situation - then please get in touch on richard.higgs@wealthwestmedical.co.uk or telephone 0117 966 5699.

Pension Savings Statements

The first port of call is the Pension Savings Statement. You will receive one if NHS Pensions believe you may have an Annual Allowance tax charge. The Pension Savings Statement will include information on:

- The amount of Annual Allowance available to you in this tax year

- The amount of your pension input into the NHS Pension Scheme in the tax year

- The amount of your pension input into the NHS Pension Scheme in the previous 3 tax years

- The amount of the Annual Allowance which was available in the previous 3 tax years.

If you receive a Pension Savings Statement please get in touch on richard.higgs@wealthwestmedical.co.uk or telephone 0117 966 5699 for an initial apprasial of your situation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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