This set of Frequently asked questions is designed to give clinicians an overview of some commonly asked questions in respect of the Policy, its benefits and how to apply for them. For fuller information on the Policy members should read the information available on our pension pages.
Last updated: 7 July 2022.
The Policy will compensate eligible clinicians in retirement for 2019/20 pension Annual Allowance charges which a member chooses to meet using the NHS Pension Scheme Pays mechanism. Not all charges are covered in every case (see below for more on eligibility).
When you use the scheme pays mechanism, your Annual Allowance charge is met through a deduction to your pension (and lump sum if applicable) at retirement. The Policy will make payments to eligible clinicians during their retirement which offset the impact of these deductions due to 2019/20 Annual Allowance charges.
The eligibility criteria are set out on our website.
Importantly you must be employed or engaged in a clinical role that requires registration with an appropriate healthcare regulatory body, see: Professional Standards Authority – Which professions are regulated
There are the following key steps:
- If you are an employed clinician, GP or dental practitioner, your employer must have provided you with a letter setting out that your contract has changed to allow the compensation to be paid (an example is on our website)*
- You must meet the eligibility criteria
- You must have an Annual Allowance charge in respect of your NHSPS benefits for the 2019/20 tax year. The Policy does not include pension tax liabilities incurred due to accruals in the MPVAC scheme, APC benefits, or contributions to another scheme. Growth in added years contracts entered into before April 2008 are covered by the Policy.
- You must use the scheme pays facility to pay the Annual Allowance charge (see below). The deadline for submitting a mandatory scheme pays election was 31 July 2021. For a voluntary scheme pays election it was 31 March 2022. For some clinicians this may need to be an estimated scheme pays election. Late submissions may be accepted at the discretion of NHSBSA.
- You must complete a compensation policy application form and have this endorsed by your employer, PCSE or NHS Dental Services as appropriate after completing your scheme pays election. This should have been submitted to NHSBSA by 31 March 2022. However, if an eligible clinician receives their 2019/20 Pension Savings Statement late for reasons out of their control, the deadline is extended to 6 calendar months after the 2019/20 Pension Savings Statement is issued.
*for self-employed clinicians (eg GP partners) there is no employer letter. The legal basis for providing the compensation to GP contract holders and performers of primary medical services is set out in this letter. There is an equivalent letter for dentists.
The compensation policy covers Annual Allowance charges incurred as a result of accrual of benefits in the NHS Pension Scheme during the 2019/20 tax year, as set out in the eligibility criteria.
If you are an employed clinician, or a dentist in primary care who is a member of the NHS Pension Scheme, then if your annual pension savings in the NHS Pension Scheme have a value greater than the standard Annual Allowance of £40,000, the NHSBSA will have sent you a Pensions Savings Statement no later than 6 October 2020 (providing NHSBSA have received the year end update for your 19/20 earnings from your employer). Not everyone who may have an Annual Allowance charge will automatically receive a statement, and depending on your personal circumstances you may need to request a Pension Savings Statement.
GPs who are members of the NHS Pension Scheme (NHSPS) do not receive a Pension Savings Statement for 2019/20 from the NHS Business Services Authority (NHSBSA) until several months after their practice has submitted their Certified Statement of Pensionable Income. The deadline for this submission was 28 February 2021.
Whenever you receive it, you Pension Savings Statement tells you (among other things):
- the value of your pension savings in the NHS Pension Scheme in the 2019/20 tax year (this is called your Pension Input Amount)
- the value of your pension savings in the Scheme during the previous three tax years (2016/17, 2017/18 and 2018/19)
To work out your Annual Allowance charge you must take away any unused Annual Allowance from the previous three tax years from the amount by which your savings exceed your Annual Allowance in the 2019/20 tax year. Therefore, even if you have breached the Annual Allowance in 2019/20 this does not necessarily mean that you have an Annual Allowance charge to pay. This is explained in more detail in the NHSBSA Pension Savings Statement Guide. It is important to read this guide in full. Other information about the Annual Allowance can be found on the NHS Business Services Authority website.
You need to calculate your taxable income at the end of a tax year in order to determine whether you may have a reduced or “tapered” annual allowance limit for that year. For 2019/20 having a threshold income of more than £110,000 and an adjusted income of more than £150,000 would result in an annual allowance which is less than £40,000. The reduction to the annual allowance is tapered, reducing the standard annual allowance by £1 for every £2 of adjusted income you had over £150,000. If you had adjusted income of £210,000 or more you have a tapered annual allowance of £10,000 for 2019/20. Threshold and adjusted income are HMRC defined terms and you can find more information on how to determine and work out these incomes by visiting HMRC’s website.
This is also explained in more detail in the NHSBSA Pension Savings Statement Guide.
The Policy commitment includes compensation for charges related to a lower tapered annual allowance.
If you have already paid your Annual Allowance (AA) charge you have 12 months to revise your self-assessment tax return. However, refunds for overpaid tax can be claimed up to 4 years after the end of the tax year in question (5 April 2024) by writing to HMRC.
You can find more information on changing tax returns and claiming refunds on the government website. You can then submit a scheme pays election for 2019/20 to NHSBSA along with a Compensation Policy application form.
Scheme Pays is a facility in the NHS Pension Scheme which enables scheme members to use their pension savings to pay any taxes to HMRC. The process is set out in the NHS Pensions Scheme Pays Election Guide.
The NHS Pension Scheme pays the tax on your behalf when it is due, and members pay the scheme back through a reduction in their retirement pension (or lump sum).
We have guaranteed that any eligible reduction to your pension through using scheme pays for 2019/20 will be compensated on retirement through payments that mirror the amount of this reduction.
However, you should first of all check whether you have any unused Annual Allowance from the three previous tax years that you can carry forward and offset against your Annual Allowance excess for 2019/20 (as set out above). If you do not have enough carry forward to completely offset the excess then you will be liable to pay an Annual Allowance charge and can apply for the Policy.
There are two forms:
It is important that you do not send in your policy application form before your scheme pays election form. It is fine to send them in together where this is possible.
Scheme pays election
The deadline for NHSBSA to receive a mandatory scheme pays election for 2019/20 was 31 July 2021. NHSBSA extended the deadline for a voluntary scheme pays election to 31 March 2022. Late submissions may be accepted at the discretion of NHSBSA. Where you are in receipt of your Pensions Savings Statement for 2019/20, you should check your statement, and then you work out whether your benefits are subject to an Annual Allowance charge as soon as possible, and if relevant make a scheme pays election. If you have not received a Pension Savings Statement but believe you may have an annual allowance charge to pay for 2019/20, we recommend that you make an estimated scheme pays application as soon as possible.
Compensation cannot be paid if you choose to pay any pension tax charges owing to HMRC directly from your own resources.
There are two types of scheme pays available in the NHS Pension Scheme and which one is applicable to you will depend on your personal circumstances. These are known as voluntary and mandatory scheme pays. If you are using voluntary scheme pays early submission of the scheme pays election will ensure that you minimise any interest charges on taxes owing. Please see the Scheme Pays Election Guide for more details on this.
Some groups of clinicians with specific circumstances (such as GPs) will not have received a pensions savings statement by 6 October 2020. If you think you may have an Annual Allowance charge for 2019/20 (for example, you usually have to pay one, or you have a large increase in your pensionable income or total income for 2019/20) you should submit an estimated scheme pays election as soon as is practicable and complete a Policy application form to ensure that you don’t miss out. Estimates for 2019/20 Annual Allowance charges can be corrected until 31 July 2024.
If you are about to retire, to make use of scheme pays you should endeavour to submit an election form to NHSBSA before you start to draw your pension (in line with their guidance). This may be an estimate if you have not yet received your Pensions Savings Statement. You can at this point also submit your Policy application form.
Compensation payments will be made where a member’s NHSPS scheme pays election is estimated. However, efforts will be made by NHSBSA to ensure that clinicians confirm that their estimate is correct, or that they review their estimates prior to any 2019/20 PAACCS payments being made. Once a member has reviewed their scheme pays estimate and submitted a scheme pays election not marked as an estimate then, where payments are already being made from the 2019/20 PAACCS , any appropriate back payments will be made, or conversely reductions to payments where there has been an over payment.
Policy application form
- If you are a secondary care clinician you should ask your main employer for 2019/20 to endorse your application. This endorsement is purely to confirm that you have been working for that organisation in a clinical role that requires professional clinical registration in 2019/20, and that you have that registration. Your employer for 2019/20 will need to retain a copy of the form for their records. If you are about to change the organisation that you work for, please ask your current employer to endorse your eligibility before you leave. (Please note your employer will not have access to wider information about your personal circumstances, for example any income you receive from non-NHS sources). You should return the form by post to the NHSBSA, with your scheme pays election or shortly afterwards, keeping a copy for your records. Please do not try to return your form by email, this may result in your form not being processed.
- Hospital locums who are eligible should get the organisation that they work with most often to provide the employer endorsement.
- If you are a GP you will download the form. When you have filled in your part of the form you will upload the form to PCSE who will endorse your application. This is purely to confirm that you have been working in a clinical role during 2019/20 that requires professional registration and that you have that registration. They will then send you an electronic copy and a copy will be sent to NHSBSA by them. The third window for submission of applications forms for GPs closed on11 February 2022. Details of how late GP applications will be handled are being confirmed.
- If you are a dental practitioner NHS Dental Services has provided an e-form via Compass which you should complete and which will then be endorsed by NHS Dental Services. They will send you an electronic copy and send a copy to the part of NHSBSA that is dealing with the compensation policy.
Once NHSBSA has your scheme pays election and your application form they will notify you that your policy application has been received.
Your application will need to be endorsed by Primary Care Support England (PCSE). They have been receiving application forms from GPs during specific windows, with the third window running to 11 February 2022. PCSE will be processing the forms received and sending them to NHSBSA. You will receive a confirmation when the application has been sent to NHSBSA. Details of how late GP applications will be handled are being confirmed.
Please make sure that you have submitted your scheme pays election to NHSBSA before making an application for the Compensation Policy. Visit the NHS Business Services Authority (NHSBSA) annual allowance webpage to download the scheme pays election form.
If it is confirmed that you have no tax liability for 2019/20, then the compensation policy payments will be cancelled by the scheme administrator. Should any payments have already been made NHSBSA has existing processes in place for debt recovery which will apply in such a case.
The system which will allow the compensation payments to be made is being developed for us by NHSBSA. The system will start to make payments to clinicians who have already retired as soon as practicable. For anyone retiring before the system goes live any payments that would have been due in the interim will be backdated. Once you have submitted the scheme pays and eligibility forms the NHSBSA will link the two forms within their systems using your pension number and personal details. NHSBSA will then provide confirmation to you that your application for the Compensation Policy has been received. You will not have to apply to NHSBSA separately to start to receive the compensation payments.
The compensation payments will be made on a monthly basis into the same bank account as your pension.
Once the compensation comes into payment, you will be told how much you will be paid in the coming year. Going forward you will receive an annual P60 and a payslip which indicates the amount you can expect to receive during the next year. This mirrors the approach taken for the NHS Pensions Scheme. Annual uplifts to the compensation payment will be at the same rate as those that are applied to your NHS pension.
For all clinicians who have an employer in 2019/20 (known as Category 1 clinicians), the payments will be taxed as income in the same way as your NHS pension. As with all income the rate of tax may vary from year to year to reflect any changes in tax rates and in your personal circumstances. For clinicians with an employer the payments will not attract any National Insurance contributions.
For those clinicians who are self-employed in 2019/20, HMRC has informed us that the policy payments can be classified as “Miscellaneous Income”. As a result, the payments will be made to clinicians who are self-employed in 2019/20 net of basic rate tax (currently 20%) which will be deducted at source. Payment of any additional tax due to HMRC in relation to these payments (which will be determined based on total earnings in a tax year) will be the responsibility of individual clinicians and should be submitted via their annual tax return.
No. It is not possible to take your full policy entitlement as a one-off lump sum.
In addition, there is no option to exchange part of the policy benefit for a lump sum at retirement.
For any 1995 section members, where there is a scheme pays deduction applied to the automatic tax-free lump sum, the policy will provide a lump sum payment to offset this.
When a member dies after retirement, if they have a dependant, the compensation payments will be paid during the period any applicable short-term pension is in payment to that dependant (as described in this NHS Pensions Survivor’s Guide). This is usually three months, unless there are also dependent children. Once the dependant’s pension is in payment the compensation payments will cease.
This is because any scheme pays deduction that reduced a member’s pension whilst they were alive continue to be applied to the short-term pension but are do not affect a dependant’s pension.
If a member dies within five years of retirement a lump sum is payable equal to the balance of payments for the remainder of the 5-year period.
On early retirement members will also be fully compensated for any 2019/20 tax charge if they have confirmed their eligibility. On early retirement the pension will be reduced for early payment and the scheme pays adjustment in respect of the 2019/20 tax year (as well as for any other tax years) will be calculated in the normal way using the factors in force at the time (based on age at early retirement) and applied to the early retirement pension.
Scheme pays adjustments can apply to different sections of the NHS Pension Scheme and so could become effective at different times if the benefits are taken separately. Payments made to deliver the Policy will also become effective at different times to match this. The pension scheme that any 2019/20 scheme pays adjustment will apply to is determined at the time the scheme pays election is made and depends in which scheme the annual allowance was breached. This is set out in the scheme pays election guide.
Partial retirement will not trigger a payment under the PAACCS. PAACCS benefits will only be paid when a member fully retires in the NHS Pension Scheme. This is necessary in order to comply with tax and national insurance legislation as it applies to the PAACCS payments. The PAACCS benefits due will be calculated using the full value of an individual’s notional negative defined contribution amount in relation to their 2019/20 scheme pays election and the scheme pays factors in force at the date of their full retirement, as though they had not taken partial retirement. This approach aims to fully compensate individuals for any scheme pays deductions taken between partial and full retirement, with the calculation including a provision for back payments and interest.
Where a member has opted to take partial retirement and dies before taking full retirement, a lump sum equivalent to 5 x annual PAACCS benefits that would be payable had the member fully retired on the date of their death will be paid to the member’s estate.
Yes – the payments made under the 2019/20 Policy will still be available alongside regular NHS Pensions at retirement, even if individuals cease NHS employment/work before retirement.
If an eligible clinician is employed by more than one Trust during the 2019/20 tax year and incurs a tax charge, they should ask the employer with whom they had the most substantive employment over the period to make the commitment. Only one employer is required to make the contractual commitment.
However, this should have no impact on employers as costs in relation to the payments will be met/reimbursed by NHSE and administered by NHSBSA. We wish to avoid apportionment of the benefit in this case.
If you have questions about the Policy’s benefits which cannot be answered through these FAQs please contact NHSBSA from the UK on 0300 330 1346 and calling from abroad on 0191 279 0571.