Superannuation: The Scheme Pay Election

Increasingly doctors are asking us how to deal with the annual pension savings charge and the mechanics of making a scheme election.

You will be liable to the annual allowance charge if your annual pension savings are more than the annual allowance for a tax year, taking into account any unused annual allowance brought forward.  You will have to report the excess pension savings on your self assessment tax return.  The amount of the annual allowance charge will be included in your tax calculation and you would normally have to pay the charge with your usual self assessment tax.  However, you may make an election requiring the administrator of your pension scheme to pay the annual allowance charge on your behalf out of your pension scheme.  There will be an appropriate reduction in your pension benefits.  This is the ‘scheme pay election’.  You need to ensure you fully understand the consequences for your pension benefits before you decide to make this election.

In order to make a valid election, you have to meet the following conditions:-

  • You have to make the election within the time limit. For example, if you want your pension scheme to pay your annual allowance charge for the tax year 2013/14, you must make the election no later than 31st July 2015.
  • Your annual allowance charge for the tax year must exceed £2,000.
  • The amount of your pension savings in the NHS scheme alone must be more than your annual allowance for the year.

If you make the scheme pay election you will still need to make entries regarding your annual pension savings on your self assessment tax return.  You will need to include an entry for the annual allowance charge, entries for the amount of the charge being paid by your pension scheme and the amount of charge being paid by yourself.

How We Can Help 

  • We can calculate the annual allowance charge.
  • We can help you make the election requiring your pension scheme to pay the annual allowance charge.
  • We can ensure you understand the consequence of making the election.
  • We can ensure that HMRC acknowledge you have made the election and that your account with HMRC is credited with the payment made by your pension scheme.