There are a number of factors that can affect your Annual Allowance calculation.
Additional Pension (AP) and Added Years
AP and Added Years bought by a lump sum payment or purchased by 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, 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 Annual Allowance.
This is because the NHS benefits you’re about to receive will have been increased.
You may also be affected if you’re taking Tier 1 ill health pension benefits and you were paying for Added Years 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 Annual Allowance. If they are, we’ll send you an Annual Allowance pension saving statement before your benefits are authorised.
You may be exempt from an Annual Allowance charge if you meet HM Revenue and Customs (HMRC)'s 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 or not.
Pension Debit and Pension Credit
If you have a Pension Debit or Credit, it’s not included for Annual Allowance purposes in the tax year.