The Annual Allowance (AA) is a limit which restricts the amount of pension growth you are allowed each year before tax charges apply.
Where your pension growth exceeds this limit, any charge is intended to recover tax relief received on the contributions you have paid.
The key word here is growth as it is NOT based upon your nor your employers actual contribution to the scheme. We are only talking about the Standard AA. Are you affected by the Tapered AA?
The Standard Annual Allowance has in the past been reduced from a high starting level to as low as £40,000.
However, from 6th April 2023 it was increased to £60,000.
This legislation is not unique to the NHS as the principles apply to all pension savers however, the impact on members of the NHS can be more significant as is a defined benefit scheme, as well as pay scales that employees progress through during their career. It is important to ascertain what your growth is and if and how the AA will affect you.
Since October 2013 the NHSBSA Pensions has been sending out AA statements. These are mainly only sent out to those that have breached the Standard Annual Allowance and normally arrive between September and November.
If you receive one, or have had one previously you MUST check to see if there is a tax charge and you have a LEGAL obligation to inform HMRC. If you have not received one and have no private income and are not also paying into another pension, there should be nothing to do – PLEASE remember this needs to be checked annually.
If you have received one please contact us to initially confirm the figures and then to discuss what your options are.
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