Your guide to ‘Scheme Pays’ elections

If the value of the benefits across all your pensions arrangements increase by more than £40,000 in a year, you’ll be subject to an Annual Allowance tax charge. This charge can either be paid directly through HMRC’s self-assessment arrangement or you can choose to have it paid on your behalf through a ‘Scheme Pays’ election. Effectively, this means the pension scheme pays the charge on your behalf and reduces your future pension entitlement.

There are two types of Scheme Pays: mandatory and voluntary.

Mandatory Scheme Pays can be used if:

  • your Pension Input amount within a single scheme exceeds the £40,000 Annual Allowance; and
  • your total tax charge is over £2,000; and
  • your Scheme Pays election applies to the benefits within that scheme only.

Voluntary Scheme Pays

If you do not meet the mandatory conditions, SPPA voluntarily accepts the Scheme Pays elections where the total SPPA tax charge exceeds £1000, the charge is due to growth in combined SPPA scheme benefits (i.e. final salary and 2015 CARE benefits) and/or you are subject to the tapered annual allowance.

The UK Government have published guidance that will help you understand your reduced (tapered) annual allowance (opens in new tab).

Scheme pays election deadlines

The deadline set by HMRC for mandatory elections is 31 July in the year following the year to which the annual allowance charge relates.

You'll have to send your election earlier if:

  • You expect to retire - your completed election must be sent to SPPA before your pension is authorised.
  • You reach age 75 - your completed election must be received by SPPA before your 75th birthday.

You’ll have to calculate your liability for an Annual Allowance charge based on the information contained in your Pension Savings Statement. If you have benefits in more than one scheme, such as an SPPA final salary scheme and career average CARE scheme, or other private pension, then the sum of all of your pension input amounts should be considered.

As General Medical Practitioner members will not know their pension input amounts before the Scheme Pays election deadline on 31 July, we recommend that you submit your Scheme Pays election with an estimated tax in order to meet the HMRC deadline. This can be amended later and processing will be held until you receive your statement and confirm the charge yet to be paid, via a second election form if the amount differs from your initial election.

Payment Deadlines

Mandatory Scheme Pays

For mandatory Scheme Pays the scheme administrator becomes jointly and severally liable (with the member) for the annual allowance charge and must pay this to HMRC within a given timescale. No interest is payable if SPPA makes payment by 14 February following the mandatory scheme pays deadline.

Voluntary Scheme Pays

Annual allowance charges that do not meet the mandatory Scheme Pays conditions are due to be paid to HMRC at the normal self-assessment deadline, the January after the end of the tax year for electronic returns. If you meet the conditions and SPPA accepts your Voluntary Scheme Pays election, late payment charges and interest may be payable to HMRC from this date until the charge is paid. You will be liable for any such charges. SPPA will aim to pay the tax due in the next routine tax return (submitted quarterly) following receipt of a completed election and all required information from the member and employer.

Following receipt of an initial election notice within HMRC's deadline, you can complete a second election if there’s a change to the amount of your Annual Allowance charge. This could occur if you received a provisional statement and your final statement shows the AA charge has either increased or decreased.

Any Scheme Pays election amendments must be received by SPPA no later than the 31st July that follows the end of the period of 4 years from the end of the tax year to which the tax charge applies. For example:-  for 2017/2018 this was 31st July 2022. Any additional liability will need to be settled directly with HMRC.

Information regarding deadline dates as set by HMRC can be found in section PTM056440 of the Pensions Tax Manual (opens a new tab).

Apply for scheme pays

The election form should be fully completed if you wish to apply for scheme pays. Incomplete forms will be rejected and this may have consequences for your meeting the relevant deadlines.

The electronic form can be completed and emailed to Alternatively, a physical copy of the form can be posted to:

Scottish Public Pensions Agency
7 Tweedside Park

If any election contains an electronic signature then the email should contain confirmation that you have personally submitted the request, since we cannot accept scheme pays forms with electronic signatures from any third party.

Apply for Scheme Pays