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Guidance note

Scheme Name & Section

NHS (1995 & 2008)

Subject

Tax Relief Limits – Annual Allowance (AA)

The purpose of this Guidance Note is to support and complement the information available on the UCL Pension Services, NHS Pensions & HMRC websites and to set out some additional guidance on how UCL Pensions Services can assist you, and what information they can obtain for you.

It should be noted that an employee is responsible for calculating their own personal AA value, as ultimately this is a personal taxation matter.  It is the responsibility of the employee to manage their own allowances and tax position and provide the required notification to HMRC of a potential charge, and for the completion and submission of any HMRC Self Assessment tax return.

UCL will assist and support you by making you aware of the issues relating to these tax relief limits and provide you with information to enable you to review your personal position.  It is better to be aware of the potential for a tax charge to be incurred and to mitigate this where possible before this point is reached.

In the first instance, familiarise yourself with the information available on the above dedicated areas of the above websites, where there are various related resources to assist you.  Also more in-depth information about the AA is available at the HMRC website.

NHS Annual Allowance – Ready Reckoner:  This gives a very simple indication of whether you could be affected.  If the modeller results indicate you have exceeded or are likely to exceed the AA for the current tax (PIP) year, it

Carry Forward:  A mechanism where you are able to offset any unused allowance from up to three tax (PIP) years against your excess pension savings.  This mechanism may be the solution for many members who have any unused previous years’ allowances to reduce or eliminate a tax charge, particularly for those who have not exceeded the limit in previous years but experience a one-off spike in the AA as a result of a promotion / increase in pensionable salary.  The AA value calculations for the 3 previous tax (PIP) years can be produced and provided to you by UCL Pension Services.

All requests for AA calculations should be made by email pensions@ucl.ac.uk   You will need to indicate in your request which year(s) you require.

NHS Money Purchase (Prudential or Standard Life) AVCs (MPAVCs):  If you currently pay these, you may wish to review the payment by either reducing or ceasing payments for the remainder of the current tax year, and then resume in the following tax year.  If you decide to reduce or cease your MPAVCs or discuss the level of your contributions, you will need to contact the Insurance Company directly: Prudential 0845 070 2456, Standard Life 0800 333 306.

AA Tax Charge Payable:  If, after considering all the actions and options available to you it is identified there is a potential AA charge, as you are likely to exceed the AA limit in the current year and have no Carry Forward scope, depending on your personal circumstances and amount of the tax charge, you may elect to:

Opt out of the NHS Pension Scheme:  This means that you effectively stop contributing to the scheme (and accrue no further service) and become a Deferred Member of the scheme.  You should consider, when looking into this option, in that you do not jeopardise your eligibility to re-join the scheme at a later date.

If you are considering opting out of the NHS Pension Scheme purely for the reason that you have a tax charge, and particularly if the charge has arisen due to a one-off promotional increase to your salary level, you should think carefully about this, and seek Independent Financial Advice, to enable you to make an informed decision.

Independent Financial Advice:  It is recommended that you obtain independent financial advice.  Some aspects of pensions are complex and you may be presented with difficult decisions to make.  Staff at UCL Pension Services and NHS Pensions can provide information about the NHS scheme but cannot provide financial advice.  You may find the contact details below useful in deciding where you ultimately seek this advice:

Electing to opt out of the NHS Pension Scheme:  If after weighing up the impact on your pension savings and your eligibility to re-join the scheme at a later date (at a new employer for example) versus paying a tax charge, you still wish to proceed, you will need to complete the Form SD502 Application Form  The forms includes a Declaration outlining that you understand what pension benefits you are giving up including Life Assurance cover and family benefits.  Send the completed form to UCL Pension Services.

Pay the charge:  If it is identified that you have an AA tax charge, this has to be notified to HMRC by completion of a self-assessment tax return.  This is regardless of whether you normally complete a tax return or not.  Further information about how you inform HMRC is available on the HMRC website.

Scheme Pays:  f the tax charge is above £2,000 and the total amount of your pension savings in the pension year for the same tax year has exceeded the AA, you can choose to have some or all of your AA charge to be paid by the NHS Pension Scheme.  There will be a permanent reduction to the value of your NHS benefits at retirement in exchange for the payment of the tax charge.  This is explained in the NHS Annual Allowance Scheme Pays Factsheet.  Further information about the Annual Allowance and the Scheme Pays option is available at the HMRC website