If you have an Annual Allowance charge, you may be able to ask us to pay some or all of the charge in return for a reduction to your NHS pension benefits. This is called Scheme Pays.
We offer 2 types of Scheme Pays facility:
- mandatory Scheme Pays
- voluntary Scheme Pays
To be eligible for mandatory Scheme Pays both:
- the pension input amount in either the 1995 or 2008 Scheme or the 2015 Scheme must be more than the standard Annual Allowance
- your Annual Allowance charge for the year must be over £2,000
If you’re not eligible for mandatory Scheme Pays, you may be accepted for voluntary Scheme Pays if:
- you have membership in more than one NHS Pension Scheme
- the input amount in one or both NHS Pension Schemes does not exceed the standard Annual Allowance
- the combined pension input amount when added together exceeds the standard Annual Allowance
There is no minimum Annual Allowance charge for voluntary Scheme Pays.
The voluntary Scheme Pays facility was extended from the 2017/18 tax year to include members who had not exceeded the standard Annual Allowance but had exceeded their own tapered or alternative Annual Allowance through the growth in their NHS Pension in either one scheme or across both. From 2017/18 it's no longer a requirement that your Annual Allowance charge needs to exceed £2,000 to apply for Scheme Pays.
If we’re paying some or all of your Annual Allowance charge through voluntary Scheme Pays, you’ll remain liable for any late payment interest HM Revenue & Customs (HMRC) may charge.
You’ll be charged if the Annual Allowance charge is paid after the self assessment tax return deadline of 31 January.
For both mandatory and voluntary Scheme Pays you can only ask us to pay for an Annual Allowance charge that was incurred due to growth in the NHS Pension Scheme. Any charges related to pension savings outside of the NHS, cannot be paid through Scheme Pays.
If you’re accepted for Scheme Pays, you’ll be told if the charge is to be paid using our mandatory or voluntary Scheme Pays facility, or both.
If you make a Scheme Pays election, you cannot change your mind and pay the charge yourself after it's been accepted.
Read more information about Scheme Pays on our website.
Multiple Annual Allowance charges
If you have Annual Allowance charges in multiple NHS Pension Schemes, you cannot ask one NHS scheme to pay all your Annual Allowance charge.
If you want us to pay some, or all, of your Annual Allowance charge, you must complete elections for each NHS scheme.
You must tell us how much of the Annual Allowance charge you want each NHS scheme to pay.
How much of your Annual Allowance charge the Schemes can pay, depends on the pension input amount in each scheme.
Add up the pension input amounts from the 2 pension savings statements we sent you. If you’ve not received a statement, you can estimate these.
You can make an election where the pension input amount in one or both schemes is under your Annual Allowance, as long as the total pension input amount from both schemes is more than your available Annual Allowance.
Applying for Scheme Pays
If you want to ask NHS Pensions to pay your Annual Allowance charge to HMRC, you must complete the Scheme Pays Election Notice (SPE2). You must only complete the current version of the election notice.
We must receive your election by the 31 July, following the January in which the Annual Allowance charge must be declared on your self assessment tax return.
The deadline for the tax year 2022/23 is 31 July 2024.
The deadline for the tax year 2021/22 was 31 July 2023.
Scheme Pays elections can be submitted after you retire on a voluntary basis. You must complete and send your SPE2 before your 75th birthday.
If your election is rejected, you can appeal the decision.
Changing your Scheme Pays election
You can make changes to your Scheme Pays election if the amount of Annual Allowance you want us to pay changes.
You must complete another Scheme Pays Election Notice (SPE2). Tick the box in Part B to confirm you’re changing a previous election.
We must receive your request no later than the 31 July that follows the end of the period of 6 years from the end of the tax year to which your liability relates.
If your Annual Allowance charge has increased, we’ll pay any outstanding tax to HMRC.
If we are using our voluntary Scheme Pays facility, HMRC may contact you to pay interest on a late payment.
If your Annual Allowance charge has reduced, we’ll reclaim any overpaid tax from HMRC. If you’ve retired, your NHS benefits will be reassessed and any additional NHS pension benefits paid to you.
Read more information about the deadline for Scheme Pays in the Scheme Pays Election Guidance Notes.