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 individuals use the Scheme Pays mechanism, their Annual Allowance charge is met through a deduction to their 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 Policy will only apply to clinicians who:

• were members of the NHS Pension Scheme (NHSPS) in the tax year 2019/20
• were employed or engaged in a clinical role during 2019/20 that required registration with an appropriate healthcare regulatory body, see: Professional Standards Authority – Which professions are regulated
• had a valid registration for the period of the 2019/20 ‘Scheme Pays’ election
• incur a tax charge associated with breaching the annual allowance, including the tapered annual allowance, in relation to the 2019/20 tax year in respect of membership of the 1995, 2008 and 2015 NHS pension schemes and who use ‘Scheme Pays’ election to pay the tax charge.

Individuals who meet these criteria are referred to as ‘Eligible Clinicians’. These criteria apply equally to general practitioner and general dental practitioners, and those working for NHS trusts*, relevant non-NHS employers, and general and dental practices. If you are an employee, your employer will need to vary your contract of employment to incorporate the 2019/20 Annual Allowance Compensation Policy. Employers have been provided with template letters to use.

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.

*Throughout these FAQs the term NHS trusts is used to cover both NHS trusts and NHS foundation trusts.

Clinicians working for non-NHS organisations will also be eligible to benefit from the Policy providing they are delivering NHS services and meet the overall eligibility criteria, including being employed or engaged in a clinical role in 2019/20 that requires registration with an appropriate healthcare regulatory body and are a member of the NHS Pension Scheme.

General practitioners, dentists and other clinical staff may be members of the NHS Pension Scheme not as NHS employees but by virtue of holding contracts for the supply of NHS primary care services, or being members of a GP partnership which holds such contracts.  This means the detailed implementation of the Policy will need to be slightly different, but the benefits provided by the Policy will be the same.

NHS organisation employees:
The Secretary of State ultimately takes responsibility for liabilities of NHS organisations. The commitment to make this payment will be one which is contractually binding between the individual clinician and their NHS employer or successor. However, if there is no NHS body responsible for meeting this liability at the time of retirement, the Secretary of State will take responsibility for securing that payments are made.

Clinical academics:
For ‘clinical academics’ whose substantive employer is a higher education institution (HEI) and who has an ‘honorary contract’ with an NHS Trust, then NHSE has agreed with the HEIs that it is the HEIs who will make the contractually binding promise to make the payments under the Policy.  This promise is in turn backed up by the Secretary of State.

Independent and third sector employees:
For those carrying out NHS work in the independent or third sector and who paid into the NHS Pension Scheme during 2019/20 as a result of this employment, your employer may make the contractually binding commitment to make the payments to you under the Policy.  The providers can make this promise on the basis that the NHS commissioners (including NHS England) have made a commitment to providers to meet all the costs. This promise is in turn backed up by the Secretary of State.

GPs, dentists and other primary care clinicians:
For GP partners or dental partners then the promise to make the payments under the Policy is being made directly by NHS England under their power to provide financial assistance/support. This is in turn backed up by the Secretary of State. For GPs, dentists, and other clinicians who work for GP or dental practices, then the promise is backed up by NHS England and the Secretary of State.

Where an NHS trust ceases to exist, its assets and liabilities as well as the services they provide will be transferred to another trust or other NHS body, or to the Secretary of State. This means that the financial commitments, including the commitment to compensate eligible clinicians, made by NHS trusts will be safeguarded.

The promises in relation to the Policy made by HEIs to eligible clinicians would also be expected to transfer to a successor organisation in the Higher Education sector upon cessation for any reason of the HEI. However, should this not be the case these promises are guaranteed by the partner trusts and ultimately the Secretary of State.

The promises in relation to the Policy made by independent sector providers to eligible clinicians are guaranteed by the NHS bodies commissioning the services from the provider (and ultimately by the Secretary of State).

Qualifying clinicians who are members of the NHS Pension Scheme and who as a result of work during 2019/20 and face a tax charge in respect of the growth of their NHS pension benefits above their pension savings annual allowance or tapered annual allowance will elect to have this charge paid by the NHS Pension Scheme.  This is done by completing and returning a ‘Scheme Pays’ election form before the 31 March 2022 (late submissions may be accepted at the discretion of NHSBSA). This means that clinicians do not have to pay the charge now out of their own pocket.

Employers, through the letters provided to them to send to clinicians, make a contractually binding commitment to pay a corresponding amount on retirement, ensuring that clinicians can be fully compensated in retirement for the effect of the scheme pays deduction on their income from the NHS Pension Scheme.

HMRC have confirmed that under current tax law, if all tax is paid at the time it is due, it is perfectly legitimate for an NHS employer (including non-NHS organisations who are employing authorities of the NHSPS and providing services to NHS patients)  to make payments equal to the amount of any reduction in NHS Pension Scheme benefits arising from any 2019/20 annual allowance tax charge after retirement where the Scheme Pays mechanism has been used. The legal mechanism used to provide such a benefit may differ between individuals depending on their employment status.

A clinician must complete two forms to access the Policy:

• SPE2 scheme pays application form
• 2019/20 Pension Annual Allowance Charge Compensation Policy application form

The deadline for submission of the SPE2 form was 31 July 2021 for those with an annual allowance charge of more than £2,000 who wish to make use of the mandatory scheme pays election. This deadline is set by HMRC. NHSBSA extended the deadline for those making use of a voluntary scheme pays election to 31 March 2022, but late submissions may be accepted at the discretion of NHSBSA. For some clinicians, particularly where they work in General Practice, their initial SPE2 form may be an estimate of their total liability. The form can be updated before 31 July 2024.

For the Pension Annual Allowance Charge Compensation Policy Application form the deadline is 31 March 2022.  If an eligible clinician receives their 2019/20 Pension Savings Statement late for reasons out of their control, this deadline is extended to 6 calendar months after the 2019/20 Pension Savings Statement is issued. Late applications will be considered on a case by case basis.

However, we recommend that clinicians calculate whether they have an 2019/20 Annual Allowance charge as soon as they can and, if applicable, apply for Policy benefits and submit their scheme pays election (if not already submitted).

Some members of the NHS Pension Scheme have been affected by decisions made by the government in 2015.  These in effect required them to cease accrual in the 1995/2008 sections of the NHS Pension Scheme and start accruing benefits in the 2015 Scheme instead.  Protecting older NHS Pension Scheme members from having to join the 2015 scheme was determined to be unlawful age discrimination by the Court of Appeal In 2018, commonly known as the McCloud judgment.

The government has recently consulted on the steps which it will take to address this age discrimination. More detail on the approach to the remedy of this age discrimination can be found here.

For many members of the PAACCS, the application of the remedy will change their pension input amount for the 2019/20 tax year and therefore their tax charge and related scheme pays election will all need to be revised. It is expected that the PAACCS benefit will be based on the revised tax charge following implementation of the McCloud remedy. More information on this will be provided in due course.

A link to the NHSBSA’s annual allowance website is here. More information on this can be found in the eligible clinician section of the FAQs.

Members’ rights are not affected by applying for the Policy. As in any year a members’ pension will be reduced if they use scheme pays for 2019/20 to pay HMRC for any pension tax liabilities incurred. However, on retirement members will receive a separate payment made under the 2019/20 Policy which compensates them for the reduction to their pension from using scheme pays for 2019/20 pension tax liabilities.

Clinicians providing care to NHS patients who opted out of the NHSPS for some or all of the 2019/20 tax year were able to opt back into the NHS Pension Scheme, if they wished to do so.

If a member opted back in, they were not be able to backdate the date of re-joining and their contributions.

More information on opting back into the NHS Pension Scheme (and the Section that members would be eligible to join) can be found at the following websites:

• NHS Business Authority: Joining the scheme
• NHS Business Authority: How do to opt back into the NHS Pension Scheme

There is no cash alternative to compensation that can be offered if you were not a member of the NHS Pension Scheme in 2019/20.

If an eligible clinician changes employer after the end of the 2019/20 tax year, there will be no impact, as payments under the Policy will remain linked to the employer that endorsed the member’s eligibility.

If an eligible clinician moved between employers during the 2019/20 tax year, and incurs a tax charge, then the additional payments made under the Policy will be linked to the employer that made the commitment to the employee (via the published template letter).

If an eligible clinician with Policy benefits transfers their full entitlement to their NHSPS benefits out of the Scheme (after they have applied for the Compensation Policy) by taking a Cash Equivalent Transfer Value their Policy benefits will still be payable.  NHSBSA will start to make these payments when the clinicians’ NHSPS payments would have been due. It is not possible to transfer Policy benefits or exchange them for cash. Information about transfers from the NHSPS can be found in this factsheet by the NHS Business Authority.

Members can retire before Policy benefits are paid. NHSBSA has recently changed its rules on the requirement to submit a scheme pays election prior to retirement, and will accept an election after a member has retired, so long as the election is received before the relevant scheme pays deadline for the tax year in question. For a mandatory 2019/20 election this was 31 July 2021.  For a voluntary 2019/20 election it was 31 March 2022, but late submissions may be accepted at the discretion of NHSBSA).

Using scheme pays for 2019/20 is a condition if members wish to take advantage of the commitment that has been made for 2019/20. The NHSBSA scheme pays election guide sets out more detail on how to make a scheme pays application, including where this is an estimate.

For those employed secondary care clinicians who have recently retired and submitted an estimated scheme pays application, and those who are retiring during the next few months, it may be that their employer is asked to confirm eligibility after they retire.

Where a scheme pays election has been made on an estimated basis, this should be updated and confirmed using correct information as soon as possible to ensure fairness to you, other members and the taxpayer.

The deadline for policy applications was 31 March 2022. 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.