As you may be aware from our previous discussions and correspondence with NHS Pensions, by now we had been promised final 2013/14 annual allowance statements for all GPs. Unfortunately we have seen very few of these being issued by NHS Pensions and at this point it seems unlikely that they will do so prior to 31 July. As a result of this we are still unable to advise GPs as to potential tax liabilities arising for that year should pension growth exceed the Annual Allowance of £50,000 after utilisation of available carry forward relief, once final figures are eventually known.

GPs who would wish to have any Annual Allowance pension tax liabilities settled on their behalf by NHS Pensions (rather than from personal funds) by way of a Scheme Pay Election have until 31 July 2015 to make an election, otherwise any tax liabilities arising once figures are known will need to be settled with HMRC by GPs personally.

For a Scheme Pay Election to be valid, the Annual Allowance charge (tax liability) needs to be in excess of £2,000, but it is not necessary to elect to have NHS Pensions pay the whole liability arising, so e.g. the liability can be met partly personally and partly by Scheme Pay, providing the total liability exceeds £2,000. However if it doesn't exceed £2,000, the liability needs to be met personally.

Clearly in the absence currently of the required information it may be prudent to make an election on an estimated basis, particularly if you are a long standing high earning GP or have had a history of high pensions growth, to preserve flexibility in this respect as the election can be varied at a later date, either upwards or downwards.

BDO LLP is not however able to formally advise on whether a Scheme Pay election should be made or not, as the settlement of a liability by NHS Pensions will have an effect on future pension benefits, which constitutes the provision of regulated investment advice which BDO LLP is not authorised to provide and you should therefore refer to a financial adviser as appropriate. You may also find the background information from NHS pensions (which you can view from the link below) helpful in explaining how the Scheme Pays option impacts on your final pension (page 4 makes specific reference to this). This includes reference to the interest charge for Scheme Pays application which is 3% plus CPI. You would need to consider this cost and impact upon your final pension against alternative methods of funding any annual allowance tax charge. Read the

Read the NHS Annual Allowance – Scheme Pays Facility Factsheet.

If you are unsure on how you would meet liabilities for pensions annual allowance charges if they arose then it may be prudent to consider making an estimated election to keep options open for the method of settlement of any tax liabilities once finally determined.

GPs wishing to make an estimated Scheme Pay Election should therefore complete the form SPE2 from the Scheme Pay section and return it to NHS Pensions to reach them on or before 31 July 2015. If the election is received after this date then they can reject it.

Whilst we have had success in appealing Scheme Pays election rejections for earlier years (where information has been provided by NHS Pensions after the deadline), we are advised that this is on a concessionary basis and therefore should not be relied upon for future years.

Part B of the form should be completed as follows:

  • "Relevant Tax Year", 2013/14.
  • "Is this a change.." No.
  • "Growth exceeding Annual Allowance" box should be filled in as £5,020 (Estimated).
  • "Tax rate" box should state a rate of tax of either 40% or 45% according to individual circumstances.
  • "Amount NHS Pension Scheme to pay" should be completed as £1 (Estimated).
  • "Is this an estimate"- to be ticked yes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.