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Guidance note

Scheme Name & Section

USS Final Salary

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, USS & HMRC websites and to set out some additional guidance on how UCL Pension 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 & 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.

USS Annual Allowance (AA) modeller:  Calculate the value of your Annual Allowance for the current tax (PIP) year.  Unless you are one of the categories excluded from using the modeller (as set out in the modeller exclusion notes), the results produced are sufficiently accurate to give you an indication of how much Annual Allowance you have used this year.

If the modeller results indicate you have exceeded or are likely to exceed the AA for the current tax (PIP) year, you should immediately make a request by email to pensions@ucl.ac.uk for a more accurate AA calculation to be provided by USS.  Once it is received from USS it will be forwarded on to you.

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.

Because of the definition of the USS Pensionable Salary, the Carry Forward calculations for the three previous PIP years have to be provided by USS.  Requests for AA calculations for the previous three PIP years immediately prior to the current PIP year can be made by email to pensions@ucl.ac.uk  Once they are received from USS they will be forwarded to you to review and assess.

USS Money Purchase (Prudential) AVCs (MPAVCs):  If you currently pay these, you may wish to review the payment by either reducing or ceasing the payment 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 contributions, you will need to contact Prudential directly on 0845 070007.

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, there are various options below to consider.

USS tax relief options:  These were introduced to assist Final Salary section members who may have or are likely to have an AA or LTA charge.  Find out more about these options by viewing the Factsheet, watching the video which gives an overview of the options, and reading the USS : Tax options frequently asked questions, all available on the USS website.

If after weighing up the choices and USS options available and after taking obtaining financial advice, it is concluded you need to make an election for one of the 3 options available from USS, you should proceed as follows:

Making an Election for one of the USS tax relief options:  An election form (separate form for each of the 3 tax relief limits options) can be downloaded directly from the USS or UCL Pension Services Websites, noting that USS requires 28 days notice in writing before the date of the election.  Send all Completed Election forms to UCL Pension Services.

Pay the charge:  If, after considering all the actions and options available to you 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:  If 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 USS.  There will be a reduction to the value of your USS benefits at retirement in exchange for the payment of the tax charge.  The USS website has information about the current rates in force and notes  Further information about the Annual Allowance and the Scheme Pays option is available at the HMRC website.

Independent Financial Advice:  Some aspects of pensions are complex and you may be presented with difficult decisions to make.  Staff at USS and UCL Pension Services can provide information about USS and the choices and options available to you, but cannot provide financial advice.  It is recommended that you obtain independent financial advice.

You may find the contact details below useful in deciding where you ultimately seek this advice: