Any updates for NHS Pension Scheme members with Annual Allowance charges in the 2019/20 tax year?

Category: News&Tax

The British Medical Association (BMA) has written to doctors reminding them of the 2019/20 Annual Allowance Charge Compensation Scheme.

What is the compensation scheme?

The compensation scheme aims to cover annual allowance charges arising in the NHS pension scheme incurred in the tax year 2019/20. The scheme covers NHS England and NHS Wales, but not NHS Scotland. This was an interim measure for the tax year 2019/20. The NHS and the Government put it in place to resolve staffing issues the tapered annual allowance was causing. Please see our earlier post. The significant increases in the Threshold and Adjusted Income limits have attempted to resolve this for 2020/21 onwards.

What does the letter say?

The letter reminds doctors that to benefit from the scheme, they must elect to use scheme pays. They should not pay any tax charge themselves. It notes although the deadline for this is July next year, members should complete the forms as soon as possible.

Where a member uses voluntary scheme pays, technically the tax is still due by the 31 January 2021 deadline. Interest may apply where the scheme makes the payment later than this. If a member makes the election before the end of this year the scheme should make the payment by 14 February 2021. This should result in minimal potential interest charges.

The BMA are expecting the NHS to issue Annual Allowance Charge Compensation Policy Forms very shortly in England and early next year in Wales. This will allow clinicians to claim the contractual payment at retirement equivalent to any reduction in pension arising from the scheme pays charge.

The deadline for completing the compensation charge form is not until 31 March 2022.

What if I don’t know what the charge is?

Where a member is not sure what their annual allowance charge is, the BMA recommend they should make an election with an estimated or nominal figure. Members can amend their scheme pays election for up to four years after the deadline. The key thing is that a member must put a scheme pays election in place to benefit from the compensation scheme.

Where can I find more information?

The NHS frequently asked questions relating to the proposal are available here.

More information on the tapered annual allowance can be found here.

If you want to discuss this, feel free to book in a free no-obligation chat here or get in touch.

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