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Additional NHS pension and breaching the 40 k annual limit

5 replies 402 views
sm50sm50 Forumite
9 posts
First Post
MoneySaving Newbie
I am planning to put some additional  contributions into my 2015 scheme (I also have some benefit in 1995). I have a few questions about additions and also the implications ie how do I calculate whether I have breached the 40 k threshold my questions are as follows:
1. Can I pay a lump sum and also pay by increments is there flexibility to do both at the same time?
2. My benefits in the 1995 scheme are still seeing annual rises due to my salary increasing - do I count these increases towards the 40k threshold 
3. On my annual pension statement  there is a line which says what my contribution is and what my employer's contribution is (do I use the sum of the 2 and also add this to my count towards the 40k limit?
4. There seems to be a facility to make use of a previous years unused annual allowance and add it to a current year. If I wish to do so do I have to make some sort of application/notice - how does it work.
5. Are there other things that I need to consider 
thanks is advance for responses 

  

Replies

  • georgeheregeorgehere Forumite
    73 posts
    Part of the Furniture 10 Posts Combo Breaker
    There are a few threads on this topic in recent weeks which should answer most of your questions - plus gov.uk under the 'Tax on savings and investments section'. For higher earners, the annual allowance has been tapered in previous years so that might be a complication you need to consider.
  • zagfleszagfles Forumite
    15.7K posts
    Ninth Anniversary 10,000 Posts Name Dropper Chutzpah Haggler
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    I don't know the specifics of the NHS scheme, but for a DB scheme it's not contributions that matter, it's the "pension input amount" which is basically a measure of how much the value of the pension has increased. The scheme statements should tell you what the PIA is for previous tax years to give you an idea how much you have to play with. You can carry forwards unused allowance from the last 3 tax years, as long as you were in a scheme those years. Note that for a final salary scheme, a big payrise can cause a massive PIA due to the way it's calculated. As above note the taper if income over £110k. This is rising to £200k next tax year. 
  • hyubhhyubh Forumite
    2.8K posts
    Seventh Anniversary 1,000 Posts
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    2. My benefits in the 1995 scheme are still seeing annual rises due to my salary increasing - do I count these increases towards the 40k threshold 
    3. On my annual pension statement  there is a line which says what my contribution is and what my employer's contribution is (do I use the sum of the 2 and also add this to my count towards the 40k limit?
    4. There seems to be a facility to make use of a previous years unused annual allowance and add it to a current year. If I wish to do so do I have to make some sort of application/notice - how does it work.
    5. Are there other things that I need to consider 
    thanks is advance for responses 
    2) Yes, or more exactly, your 1995 scheme benefits have their own AA calculation. So, if your pensionable pay (whole-time equivalent) for the 1995 scheme keeps up exactly with inflation, then your 'pension input amount' for it will be nil. (The sum of the pension input amounts across all your pension schemes is tested against the 40K.) The slight snag is that if it fails to keep up with inflation, then the pension input amount is still nil, i.e. you can't use it to offset additional pension contributions elsewhere.

    3) Contributions are irrelevant to AA calculations for DB benefits. You need to take the annual pension earned to date at the start of the tax year, multiplied by 16 with any standard lump sum added on, uprate for inflation, then compare to the equivalent total at the end of the tax year. The difference is the pension input amount for the scheme. If you started an additional pension contract, the extra pension accrued during the year would count along with your 2015 scheme regular accrual.

    4) You have 3 years 'carry forward', yes, if you've maxed out the AA in the current year.

    5) Suggest properly going through the NHS pension scheme adminstrator's own advice, if you haven't already:

    https://www.nhsbsa.nhs.uk/member-hub/annual-allowance
  • sm50sm50 Forumite
    9 posts
    First Post
    MoneySaving Newbie
    hyubh said:

    2) Yes, or more exactly, your 1995 scheme benefits have their own AA calculation. So, if your pensionable pay (whole-time equivalent) for the 1995 scheme keeps up exactly with inflation, then your 'pension input amount' for it will be nil. (The sum of the pension input amounts across all your pension schemes is tested against the 40K.) The slight snag is that if it fails to keep up with inflation, then the pension input amount is still nil, i.e. you can't use it to offset additional pension contributions elsewhere.

    3) Contributions are irrelevant to AA calculations for DB benefits. You need to take the annual pension earned to date at the start of the tax year, multiplied by 16 with any standard lump sum added on, uprate for inflation, then compare to the equivalent total at the end of the tax year. The difference is the pension input amount for the scheme. If you started an additional pension contract, the extra pension accrued during the year would count along with your 2015 scheme regular accrual.


    4) You have 3 years 'carry forward', yes, if you've maxed out the AA in the current year.

    5) Suggest properly going through the NHS pension scheme adminstrator's own advice, if you haven't already:


    Thanks so much for explaining more about AA calculation in a DB scheme. I will also look at the link that you posted.
  • andy001andy001 Forumite
    112 posts
    100 Posts Second Anniversary
    I am planning to put some additional  contributions into my 2015 scheme (I also have some benefit in 1995). I have a few questions about additions and also the implications ie how do I calculate whether I have breached the 40 k threshold my questions are as follows:
    1. Can I pay a lump sum and also pay by increments is there flexibility to do both at the same time?
    = Yes
    2. My benefits in the 1995 scheme are still seeing annual rises due to my salary increasing - do I count these increases towards the 40k threshold = Yes (as stated above- growth in both pensions 1995/2015 is counted)
    3. On my annual pension statement  there is a line which says what my contribution is and what my employer's contribution is (do I use the sum of the 2 and also add this to my count towards the 40k limit?= as above, total growth in pension year
    4. There seems to be a facility to make use of a previous years unused annual allowance and add it to a current year. If I wish to do so do I have to make some sort of application/notice - how does it work. = Yes- (last 3yrs and in some cases last 7yrs unused allowance ). If you 're 45% tax payer- remember to look at Threshold income and tapered allowance calculations too!
    5. Are there other things that I need to consider = threshold income/tapered allowance, keep an eyes on LTA !
    thanks is advance for responses
    I'm not a Financial advisor.
    Please seek independent financial advice.
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