2019/20 Annual Allowance Scheme Pays Compensation Scheme
What is it?
It is a move to encourage NHS clinicians not to reduce their commitment to work, which many had done to try and avoid an Annual Allowance (AA) pension tax charge. For the one-off year of 2019/20 only, where you have asked the scheme to pay a pension tax charge for you, the NHS will fully recompense you so that no financial loss is suffered.
How does it work?
The compensation scheme can only be used if you have asked the scheme to pay a tax charge for you. It cannot be used if you paid the tax through your self-assessment return. When you have completed a scheme pays election for 2019/20, your pension in retirement will be reduced in the normal way to recover the tax paid on your behalf. The NHS, however, will pay you a corresponding separate salary in retirement, subject to PAYE deductions of tax and national insurance where necessary, to completely offset the reduction in pension.
How do I apply?
The application can be downloaded by clicking link below. No figures are needed on it, just your personal details and a signature and date.
What do I do with it?
The form needs countersigning by your NHS employer. For the separate categories, the process is as follows:
Employed clinicians: After you have signed and dated the form, it should be passed to the director of your employer’s Human Resources department to complete, stamp, sign and date their part. After passing back to you, it should be submitted to NHS Pension at this address:
NHS Pensions, PO Box 2269, Bolton, BL6 9JS
GPs (including partners, salaried GPs and locums): Your signed form needs to be submitted to PCSE via the online portal through the ‘GP Pensions’ and then ‘Individual Protection’ drop-down boxes.
Dentists: Will complete the form via their Compass portal.
What date does it need to be submitted?
The ‘normal’ deadline date is by 31 March 2022, but it is strongly recommended that the submission is at the same time, or slightly after, the scheme pays election is made. The deadline for 2019/20 scheme pays elections is 31 July 2021, so ideally that is the latest date you should be looking at.
There is an earlier date required for those GPs who have retired or will do by 31 March 2021. The scheme pays election for all clinicians who have done this will have been required before the AW8 application for the pension was submitted. Very recently, however, PCSE have imposed a very restrictive date for GPs only in this category of 21 March 2021. That seems wholly unrealistic under the circumstances. Representations to NHS Pensions have been made and it is understood that a soft approach will be taken with this date.
If you require any advice regarding the above please get in touch with Dave Walker, Healthcare Services Senior Tax Manager or alternatively contact us here.