Pensions: Time is running out to reclaim 2019-20 Annual Allowance charges



HCSA pensions lead Dr Sarah Tennant warns that time is running out fast to lodge your claim for the government scheme to repay your 19/20 Annual Allowance tax charge.

 


2019/20 Pensions Annual Allowance Charge Compensation - important deadlines

Following extensive lobbying by unions, including considerable work by HCSA on behalf of their members, clinicians with 19/20 NHS AA tax bills will be compensated at retirement. The policy and benefits are guaranteed by NHSEI and the Secretary of State for Health and Social Care and will be administered by the NHS Business Services Authority (NHSBSA).

There are three steps that you will need to complete:

  • By January 31st 2021: Enter the relevant information on your tax return (see more below)

  • By July 21st 2021: Complete a Scheme Pays Election Form (SPE2), which you can download from NHS Pensions. The deadline for NHBSA to receive this is 31st July 2021

  • By March 31st 2022: Submit the policy application form from NHS England. You will need to complete your part and ask your employer to endorse your form by confirming that you worked for their organisation in a clinical role during 19/20 and had valid clinical registration.

    The deadline for this is currently 31st March 2022, but HCSA recommends you return it with your scheme pays election and ask for proof of receipt.

Visit the NHS England website for further information.

 


Completing your Self-Assessment Tax Return 19/20 – Annual Allowance tax charge clawback

If you have an Annual Allowance (AA) tax charge for 19/20, you need to enter this on your tax return.

NHS England and NHS Improvement (NHSEI) have guaranteed to cover the cost of AA tax bills for eligible clinicians for 19/20 – but you MUST use Scheme Pays.

Important: Ensure you enter the amount at box 11, otherwise HMRC will ask you to pay. If you pay the bill directly you will not be eligible for compensation.

See HS345 Pension savings - tax charges (2020) - GOV.UK (www.gov.uk)

Don’t forget to ensure you use your oldest available carry-forward first, to maximise allowances – HMRC has a useful calculator here: https://www.tax.service.gov.uk/pension-annual-allowance-calculator 

 


McCloud Remedy

The 2015 public service pension scheme reforms included ‘transitional protection’ for employees closer to retirement. Following protracted legal challenge by judges and firefighters, the courts ruled that this directly discriminated against some younger pension scheme members.

In order to remove the discrimination, the government has recently consulted on potential options. Any remedy will apply to all pension scheme members who were in service on or before 31st March 2012 and on or after 1st April 2015, including those with a qualifying break in service of less than five years.  

 The consultation asked for feedback on two main options:

  • An Immediate Choice Exercise, where members would need to choose between membership of the old and new schemes as soon as practicable
  • Deferred Choice Underpin (DCU), where members would remain in, or be returned to, the old schemes for service between 2015 and 2022. At the point of retirement (or when benefits become payable) or as soon as practicable (for members who have already had a pension award), members would be then able to choose to instead receive new scheme benefits for that period

HCSA responded in detail to the government’s consultation, supporting the DCU as the option most suitable for NHSPS members.  We highlighted how recent NHS pension tax issues have underlined the complexity of the scheme and exposed the shortage of appropriate specialist financial advice and support available. The DCU would allow time for processes and systems to be optimised. 

The remedy is likely to have significant effects on AA tax charges – eg members with 1995 scheme membership will find pension input amounts are lower in one scheme only than across both 1995 and 2015, and retrospective tax calculations will be required.

At the time of writing, responses to the consultation are being analysed and feedback is still awaited. HCSA will review the government’s response and react accordingly on behalf of members.

Read further information on the proposed changes

 


Financial Advice

As we emphasised in our McCloud consultation response, HCSA remains extremely concerned regarding the limited pool of experts able to advise on a hugely complicated situation, with wide-ranging individual variation. We would welcome an accreditation scheme for advisors with proficiency in this area.  

NHS Employers have acknowledged the difficulty in finding reliable advice, and have compiled a list of organisations that are able to give expert guidance and advice on pension tax issues for members of the NHS Pension Scheme.

 


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