Your guide to Scheme Pays elections
If the value of the benefits across all your pensions arrangements increase by more than £60,000 in a year, you may 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. 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
Mandatory Scheme Pays can be used if:
- your Pension Input amount within a single scheme exceeds the £60,000 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
SPPA will accept a voluntary Scheme Pays election where the total SPPA AA Tax charge exceeds £1,000 if;
- You do not meet the mandatory conditions;
- The charge is due to growth in combined SPPA scheme benefits (final salary and 2015 CARE benefits); or
- you are subject to a tapered annual allowance.
The UK Government have published guidance that will help you understand your reduced (tapered) annual allowance.
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.
Deadlines for previous tax years are stated in the following table:
| Tax Year | Statement Issued | Election Form Deadline | Mandatory Deadline | Voluntary Deadline | Revision Deadline |
|---|---|---|---|---|---|
| 2017/2018 | October 2018 | 31 July 2019 | 31 January 2020 | 31 January 2019 | 31 July 2024 |
| 2018/2019 | October 2019 | 31 July 2020 | 31 January 2021 | 31 January 2020 | 31 July 2025 |
| 2019/2020 | October 2020 | 31 July 2021 | 31 January 2022 | 31 January 2021 | 31 July 2026 |
| 2020/2021 | October 2021 | 31 July 2022 | 31 January 2023 | 31 January 2022 | 31 July 2027 |
| 2021/2022 | October 2022 | 31 July 2023 | 31 January 2024 | 31 January 2023 | 31 July 2028 |
| 2022/2023 | October 2023 | 31 July 2024 | 31 January 2025 | 31 January 2024 | 31 July 2029 |
| 2023/2024 | October 2024 | 31 July 2025 | 31 January 2026 | 31 January 2025 | 31 July 2030 |
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 pensions, 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, you will need to complete 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.
Following receipt of an initial election notice within HMRC's deadline, you can complete a revised 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 6 years from the end of the tax year to which the tax charge applies.
Information regarding deadline dates as set by HMRC can be found in section PTM056440 of the Pensions Tax Manual.
Apply for scheme pays
The application 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 deadlines. Completed forms should be emailed to sppatax@gov.scot.
Alternatively, please post to:
Scottish Public Pensions Agency
7 Tweedside Park
Tweedbank
Galashiels
TD1 3TE
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.