On 1 April 2015 a new NHS Pension Scheme was introduced which covers all transitioning and new NHS employees. Some members are entitled to remain in the 1995 or 2008 Sections until retirement through the Scheme’s Protection arrangements. The content of this website is being updated in stages to reflect these changes. More information about the 2015 Scheme arrangements can be found here.
This webpage provides information about the Annual Allowance and contains a number of factsheets which cover a number of different aspects in relation to it.
A background to the Annual Allowance
The Annual Allowance is the maximum amount of tax free growth an individual's pension savings can grow by in any one year. The annual limit is set by HMRC. If individuals exceed this limit they may need to pay tax (the Annual Allowance charge) to HMRC.
The Annual Allowance for tax years 2011/12, 2012/13 and 2013/14 was £50,000. The Annual Allowance for 2014/15 reduced to £40,000. If you exceed this limit you may need to pay an Annual Allowance charge to HMRC.
The Finance (No 2) Act 2015 introduces two important changes to Annual Allowance:
1. To adjust the pension input period during the 2015/16 tax year so that it becomes aligned with the tax year from 6 April 2016. Transitional rules have been brought in for the 2015/16 tax year to make sure that pension savings up to £80,000 made before 9 July 2015 are protected from an Annual Allowance charge.
2. To taper the Annual Allowance for members who have a ‘threshold income’ of over £110,000 and an ‘adjusted income’ of £150,000 from 6 April 2016.
The following factsheets have important information about these upcoming legislative changes:
The Annual Allowance transitional rules for 2015/16
Tapered Annual Allowance from 6 April 2016
Tapered Annual Allowance example
HMRC has published guidance on how to calculate your tapered Annual Allowance, including a calculator, on their website at: https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance
The majority of members should not be affected by the Annual Allowance but there are a number of circumstances where members could see a significant growth in their NHS benefits that takes them over the Annual Allowance.
These circumstances are listed in our Annual Allowance – Does it affect me? factsheet. You should consider whether you are affected by one of these circumstances before contacting NHS Pensions about Annual Allowance.
If you are a transition member, you should read the Annual Allowance - Transition members factsheet.
For a more detailed overview about the Annual Allowance please see our Annual Allowance Background factsheet or our Annual Allowance general FAQ's.
The Flexibility Value Earnings Credit and its effect on the 2015/2016 Annual Allowance.
The Annual Allowance web pages are split into sub sections to help you find the information you need. These pages include factsheets and general information about Annual Allowance.
How is the Annual Allowance calculated?
This section provides you with information on how the Annual Allowance is calculated, calculation examples and the Annual Allowance Calculator/ Estimator Tool.
Exceeding the Annual Allowance
This section provides you with information about exceeding the Annual Allowance.
Informing members about Annual Allowance
This section provides you with information about how NHS Pensions will inform members if they exceed the Annual Allowance within the NHS Pension Scheme.
If the growth in your NHS pension benefits exceeds the Annual Allowance you can ask NHS Pensions to pay your Annual Allowance charge. This section provides you with information about Scheme Pays.
In October 2014 NHS Pensions stopped issuing provisional statements to Practitioner members of the NHS Pension Scheme. Further information about this decision can be found in this section.
Additional Specific Information
This section contains Annual Allowance factsheets providing information about particular circumstances. These include the alternative Annual Allowance as a result of flexibly accessing money purchase benefits and exemptions to the Annual Allowance.
There are a range of different terms and phrases used to explain or describe the Annual Allowance and we provide explanations in the glossary factsheet.
The BMA website contains useful information and FAQ's about the Annual Allowance. This information can be found by clicking the following link: http://bma.org.uk/practical-support-at-work/pensions/faq-annual-allowance
The Annual Allowance web pages reflect NHS Pensions understanding of HMRC legislation. It is important to remember that NHS Pensions is unable to provide advice on personal tax circumstances. We would recommend that independent tax advice is sought if you have any uncertainty about the tax implications.
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