NHS Pensions – Scheme Pays Elections

If the value of your pension benefits grows by more than the standard annual allowance in a tax year, you may face an annual allowance tax charge. Since 6 April 2023, the standard annual allowance has been £60,000, although it may be lower if your taxable income exceeds £200,000 and you are subject to tapering.

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 means the NHS Pension Scheme pays the tax charge on your behalf and later recovers the amount, with interest, through a reduction to your pension benefits when you start taking your benefits. Given the complexity of these decisions, you should seek financial advice to assess whether this option is appropriate for your circumstances.

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
• The deadline to submit the form is usually 31 July following the end of the tax year (i.e. for 2024/25, the deadline would be 31 July 2026)

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.

If you have not yet received a Pension Savings Statement or RPSS for a particular tax year, you may wish to submit an estimated Scheme Pays Election. 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 it as per the instructions on the form in time for the applicable deadline. Missing the deadline may restrict your options, so it is important to act promptly.

If you have any queries regarding Scheme Pays Elections, please contact the BHP Healthcare team here.