Lifetime Allowance

2015 Scheme

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.

 

Since 6 April 2006 there has been no absolute limit on the level of benefits that a member of a registered pension scheme, such as the NHS Pension Scheme, can be provided with. Instead you have a Lifetime Allowance (LTA) in respect of all your pension benefits before you become subject to a tax charge at the point of taking your benefits.

On 6 April 2014 the standard LTA reduced from £1.5m to £1.25m.

Without having a valid HMRC protection, your NHS pension benefits exceed £1.25 million at the following pension amounts:

  • 1995 Section   - £54,347
  • 2008 Section   - £62,500
  • 2015 Scheme  - £62,500

From 6 April 2016 the standard LTA will reduce to £1 million.

Without having a valid HMRC protection, your NHS pension benefits will exceed £1 million at the following pension amounts:

  • 1995 Section   - £43,478
  • 2008 Section   - £50,000
  • 2015 Scheme  - £50,000

These figures only relate to your NHS Pension Scheme benefits. If you have any pension in payment in addition to these, including NHS Money Purchase Additional Voluntary Contributions (MPAVC) you will need to take these into account.

Any benefits above the LTA will be subject to a LTA charge. The rate of tax charged will depend on whether the excess is taken as a pension or a lump sum. The LTA charge is:

  • 55% if the excess is taken as a lump sum, and
  • 25% where it is taken as taxable pension income. 

Fixed Protection 2016 and Individual Protection 2016

The Government has announced that it is to offer new protections to members who could be impacted by the reduction of LTA to £1 million.

From 6 April 2016, there will be two more HMRC LTA protections available, these are:

  • Fixed Protection 2016 (FP2016)
  • Individual Protection 2016 (IP2016).

Applications for FP2016 and IP2016 will be online using a new HMRC online self service tool, which is expected to be available to members or their authorised representative from July 2016. No applications will be accepted by HMRC before 6 April 2016.

The following is a message from HMRC’s Pension Schemes Newsletter 73.

‘There will be a period between the new protection regimes becoming available in April 2016 and the introduction of the new online self-service in July 2016. For this period we will introduce an interim process for pension scheme members who want to take benefits before the introduction of the new online service. Scheme members will be able to write to HMRC between April 2016 and July 2016 and we will check the details of their protection and respond to the member in writing. This can then be presented to the scheme administrator in advance of the full application being made after July 2016.’

The link to Newsletter 73 is: https://www.gov.uk/government/publications/pension-schemes-newsletter-73-october-2015

To be able to apply for IP2016 you will need to request a valuation of all your pension benefits calculated to 5 April 2016.  The process for obtaining an IP2016 valuation from NHS Pensions will be similar to the current process for Individual Protection 2014 (IP2014). 

 Disclaimer

At the time of publication the legislation reducing the LTA from £1.25m to £1m is not in place and the new methods of protection are not yet finalised.
 
NHS Pensions must advise caution, as there may be future changes and amendments made to the legislation, before the final drafting of the Finance Bill 2016 goes before Parliament and becomes the Finance Act 2016.

Requesting valuations for Individual Protection 2014 or 2016

Before requesting a valuation for IP2014 or IP2016, please refer to the factsheets at the bottom of this webpage.

There is no legislative requirement for NHS Pensions to provide valuations for IP2014 or IP2016. Provision of this information is, therefore, subject to payment of an administration charge as described in our current schedule of charges

 

For IP2014, individuals have a three year window, until 5 April 2017, to make an application to HMRC. For IP2016, HMRC has indicated there will be no application deadline. In order to make an application for either, individuals will need to request a valuation from NHS Pensions.

For IP 2014 valuation requests, NHS Pensions has published the forms AW295 (Officer - IP2014) and AW295 (GP - IP2014). For IP2016 valuations, the relevant forms are AW295 (Officer - IP2016) and AW295 (GP - IP2016). Any requests for an IP2014 or IP2016 valuation should be made on one of these forms, all of which are available via the links at the end of this article.

Any request that does not specify Individual Protection 2014 or 2016, or the date of 5 April 2014 or 5 April 2016, will be treated as a routine request for an estimated statement of benefits.

Hospital, Practice and Approved Employer Staff members

  • IP2014 requests will be administered throughout the period from 6 April 2014 to 5 April 2017. To ensure the necessary information is available (pensionable pay and membership to 5 April 2014) to calculate the valuations, requests should be made via your employer wherever possible using the form AW295 (Officer-IP2014)
  • IP2016 requests can be made at any time but, to ensure the neessary information is available (pensionable pay and membership to 5 April 2016) to calculate the valuations, requests should be made via your employer wherever possible using the form AW295 (Officer-IP2016)

Dental, Medical Practitioner and non-GP Provider members 

IP2014 requests - valuations will normally only be provided when final pensionable earnings have been confirmed. This is because the confirmed pensionable earnings information up to 5 April 2014 will not be available until at least the end of September 2015 (Dental Practitioners) or April 2016 (Medical Practitioner and non-GP Provider).

This will reduce the amount of times the individual member will have to contact HMRC for an IP 2014 certificate i.e. an initial request for a provisional certificate followed by a further request with confirmed figures.

For those members who retired before October 2015 (Dental Practitioner) or May 2016 (Medical Practitioner and non-GP Provider) where confirmed figures were not available NHS Pensions will have provided a Provisional IP2014 Valuation based on information provided by the member on form AW295 (GP-IP2014).

The member must then request a final IP2014 Valuation when finalised figures have been confirmed again using the form AW295 (GP-IP2014).


IP2016 requests -
valuations will normally only be provided when final pensionable earnings have been confirmed. This is because the confirmed pensionable earnings information up to 5 April 2016 will not be available until at least the end of September 2017 (Dental Practitioners) or April 2018 (Medical Practitioner and non-GP Provider).

This will reduce the amount of times the individual member will have to contact HMRC for an IP 2016 certificate i.e. an initial request for a provisional certificate followed by a further request with confirmed figures.

For those members who are retiring before October 2017 (Dental Practitioner) or May 2018 (Medical Practitioner and non-GP Provider) NHS Pensions will provide a Provisional IP2016 Valuation based on information provided by the member on form AW295 (GP-IP2016).

The member must then request a final IP2016 Valuation after October 2016 (Dental Practitioner) or May 2018 (Medical Practitioner and non-GP Provider), again using the form AW295 (GP-IP2016).

If you were a practitioner with a concurrent hospital post please complete the form AW295 GP and NHS Pensions will obtain any information required from your hospital employer.

Valuation request for Individual Protection 2014

AW295 IP Officer (Word)

AW295 IP Officer (PDF)

AW295 IP GP (Word)

AW295 IP GP (PDF)

FA11 (Word)

FA11 (PDF)

Valuation request for Individual Protection 2016

AW295 IP2016 Officer

AW295 IP2016 GP

FA11 IP2016

Factsheets

Loss of Enhanced and Fixed Protection 2012 and 2014 because of the 2015 NHS Pension Scheme 

The Lifetime Allowance  

The Lifetime Allowance Charge 

Lifetime Allowance reduction from 6 April 2016

Lifetime Allowance protections from 6 April 2016

Lifetime Allowance and Fixed Protection 2012

Lifetime Allowance and Fixed Protection 2014

Lifetime Allowance and Individual Protection 2014 

Recycling of Pension Commencement Lump Sum

Lifetime Allowance 2012 – how this affect members with protection

Fixed Protection 2012 and Benefit Accrual

Joining or rejoining due to Auto enrolment and the effect on Enhanced or Fixed Protection

LTA Pension Terms Glossary 

 For more information about Lifetime Allowance: