There are a number of factors which can affect your AA calculation:
- additional pension (AP) and added years (AY)
- backdated salary increase
- ill health
- pension debit and credit
AP and AY
AP and AY purchased by a lump sum or monthly payments must be included in the NHS Pension benefits used to calculate the pension input amount.
Backdated salary increase
If the salary increase is awarded at a date falling within the current pension input period but has backdated effect to a previous pension input period, HM Revenue and Customs (HMRC) confirm the effect of the salary increase is included in the current pension input period only.
There’s no need to recalculate the pension input amount for any previous tax years.
Ill health
If you’re taking Tier 2 ill health pension benefits, you may be affected by AA.
This is because the NHS benefits you’ll receive will be increased.
You may also be affected if you’re taking Tier 1 ill health pension benefits and you were paying for AY or AP by regular instalments. This is because you’ll receive the full amounts you were purchasing.
When we’re authorising your Tier 2 ill health retirement benefits we’ll check if your pension growth is more than the AA. If it is, we’ll send you a pension savings statement before your benefits are authorised.
You may be exempt from an AA charge if you meet HMRC Severe Ill Health Condition (SIHC) test. Our medical advisers will check for this test at the same time as assessing you for Tier 2 and will tell you and us if you meet this test.
Pension debit and credit
If you have a pension debit or credit, it’s not included for AA purposes in the tax year.