NHS Pension.

[nothernexposure]

NHS employee here and I've had a letter out of the blue letting me know I might be eligible to apply for the NHS 2019/20 Pensions Annual Allowance Charge Compensation Scheme. I've had a look on the nhs website and if I've understood correctly it looks like its something about going over my pension allowance and incurring tax charges. The scheme compensates me in retirement for any losses? Does that sound right? Can anyone explain it in numpty terms so I understand it? And are there any downsides to applying for it? I'll give them acting on Monday but often it's a nightmare speaking to someone. I'm not sadly planning on retiring for a good few years yet due to a divorce in middle age. Thanks

You would have received a Pensions Savings Statement in around September 2020 advising you that you breached the annual allowance in 2019/20 (basically the value of your pension benefits increased by more than the annual limit set by government, so you have to pay tax on the additional growth). Do you remember getting that? What action did you take? You may have already opted for scheme pays (when you ask the scheme to pay the tax for you in exchange for a reduction to your benefits).

This new scheme says that if you use scheme pays to pay any tax due for 2019/20 you will be compensated at retirement although I’m not quite clear how the compensation works. However, the link below suggests that to qualify for the compensation you need to make the scheme pays election by 31st March, if you haven’t already.

www.bma.org.uk/pay-and-contracts/pensions/tax/annual-allowance-compensation-scheme-201920

Thanks @ChessieFL. I don't remember getting anything in the post and havent found anything in my documents. I was sorting out the divorce/remortgage etc then so I could have over looked it but post does also go missing here. So I havent done anything and need to act quickly! I'll ring them on Monday and get the firms completed asap.

I assumed the letter about the compensation scheme would only have been sent to those who breached the annual allowance in 19/20 - maybe they have just sent it to everyone in which case you don’t need to worry. Definitely need to check though in case you did overlook or not receive something in 2020.