Annual Allowance

Question 1

How do you calculate the value of NHS pension scheme benefits at the start of the tax year?

Answer 1

[(Annual pension x16) + 1995 PCLS]+CPI

Question 2

When calculating the CPI figure to use for AA calcs for the 23/24 TY, which monthly CPI figure would be used?

Answer 2

September 2022

Question 3

What events could cause the closing value of a member’s benefits to be bigger/smaller than expected?

Answer 3

-Transfer payment made or received
-Pension sharing order means there is a pension credit or debit attached to the member’s benefits
-Member leaves active membership & retires

Question 4

Calculate the pension input amount for the following:
-Pensionable service - 27 years @ 5/4/17
-Salary - £30,000 @ 31/3/2017
-Promotion takes salary to £50,000 @ 5/4/18
-1995 member only
-CPI @ 1%

Answer 4

Opening value:
1. £30k x 27/80 = £10,125
2. £10,125 x 16 = £162,000
3. Lump sum - £10,125 x 3 = £30,375
4. (£162,000+£30,375) x 1.01 = £192,278.75

Closing value:
1. £50k x 28/80 = £17,500
2. £14,000 x 16 = £280,000
3. Lump sum - £17,500 x 3 = £52,500
4. £280,000 + £52,500 = £332,500

Pension input - £332,500 - £192,278.75 = £140,221.25

Question 5

What option could a pension scheme member choose if their pension input amount exceeds the annual allowance?

Answer 5

Scheme pays

Question 6

What form would have to be completed to elect for Scheme Pays?

Answer 6

SPE2

Question 7

What conditions have to be met to utilise Mandatory Scheme Pays?

Answer 7

-Pension input amount in either the 1995/2008 or 2015 schemes exceeds the annual allowance
-AA charge is more than £2,000

Question 8

What conditions have to be met to utilise Voluntary Scheme Pays?

Answer 8

-Total pension input amount across both schemes exceeds the annual allowance
-No min AA charge

Question 9

When is the scheme pays election deadline?

Answer 9

31 July following the January in which the charge should be declared on your tax return
I.e. 31/7/23 for 21/22 TY