If your pension pot grows each year in excess of the standard annual allowance (£40,000 per year up to 2022/23 and £60,000 per year from 2023/24), then you may need to pay an annual allowance tax charge on the amount above the annual allowance. This allowance may be tapered if your taxable income exceeds £200,000.
If you have an annual allowance tax charge, there is the option to use your NHS Pension to pay this tax charge for you, this is known as a Scheme Pays Election.
This is effectively a loan to you from NHS Pensions which is recovered, with interest, from your pension pot when you start drawing your pension.
There are two types of Scheme Pays:
Mandatory Scheme Pays
- Available if the charge exceeds £2,000 and if your pension growth in either the 1995/2008 scheme or 2015 scheme exceeds the standard annual allowance (as detailed above)
- Deadline to submit the form is usually 31 July following the end of the tax year (i.e. for 2023/24, the deadline would be 31 July 2025)
Voluntary Scheme Pays
- Available if the charge is below £2,000 and if your pension growth exceeds your tapered annual allowance
- Deadline to submit the form is still 31 July but the scheme isn’t obliged to accept the payment unless they agree
You can also use a mix of both Scheme Pays types.
With a Voluntary Scheme Pays Election, you are still responsible for any interest charged by HMRC if the payment is made after the self-assessment deadline of 31 January, whereas this will be paid by the pension scheme with a Mandatory Scheme Pays.
Impact of the Public Service Pensions Remedy (McCloud Remedy)
As some members are still awaiting their Remediable Pensions Savings Statements, revised Scheme Pays deadlines were set for 2019/20 to 2022/23, as follows:-
- 6 July 2025 – for active or deferred members
- 6 July 2027 – for pensioner members who retired before 1 October 2023.
After this date, Scheme Pays Elections will be processed as Voluntary Scheme Pays.
Any interest charges raised by HMRC as a result of delayed RPSS statements may potentially be claimable under the NHS Cost Claim Back Scheme.
For any years where you have not received your Pensions Savings Statement or Remediable Pensions Savings Statement, it may be beneficial to submit an estimated Scheme Pays Election as these can be amended up to four years after the end of the relevant tax year.
To complete a Scheme Pays Election, you will need to complete this form and submit as per the instructions on the form
