You may be subject to a tax charge if:
- you’re accepted for Tier 2 ill health
- there’s a large increase in your NHS pension benefits in the tax year your ill health benefits are paid.
If you meet HMRC’s SIHC test, you’re exempt from the tax charge.
The SIHC test is an assessment.
It’s a different assessment to our Tier 2 ill health test.
The SIHC test is:
- tested to State Pension Age (SPA)
- for any other paid work.
If you make an application and are successful for Tier 2 ill health, Medigold will let us know if you meet the SIHC criteria.
If you do not meet the SIHC criteria, you’ll still be eligible for payment of Tier 2 ill health benefits.
If you meet the SIHC criteria, you’ll become entitled to your full Tier 2 ill health pension benefits because you’ve been assessed as unlikely to do any gainful work in any capacity, other than in an insignificant way.
This means any paid work should be insignificant. It must be infrequent or only for a few days during the year and the payment must be small in amount, not just as a proportion of previous pay or salary.
Guidance on the SIHC test can be found on HMRC's Pensions Tax Manual.