As if life isn’t complicated enough for our NHS doctors and dentists at the moment. To add to your trials, in recent months we have recognised more annual allowance issues within the NHS pension scheme, involving differing statement figures from one year to the next.
What’s the problem?
Our advisers have noticed some clients receiving their most recent tax year annual allowance statement figures differ from preceding correspondence from those in previous tax years. In one case we saw a difference of nearly £30,000 in one of the pension schemes.
So which statement do you believe? Sadly, the most favourable correspondence may not be the right one, despite all your best wishes!
Why is this a problem?
It may not be an issue for some if their overall position does not give rise to a tax liability. For those who have a tax liability, it means they may have overpaid tax or worse, underpaid or potentially be liable when you thought you weren’t. It could even cause tax penalties for late payment.
Even if the different figures don’t change your existing picture they need to be right, as although you may not have a liability now, you may be reliant on using unused tax relief in future years under the carry forward rules.
Under the radar
In the cases we have looked at, we may not have been aware of the variation, had we not previously requested the figures. The pensions agency does not let you know the figures have changed – so we could be blissfully unaware. This does not seem right when it could impact your tax position.
This is a particular issue if you have a tax liability in a previous tax year but you have missed the scheme pays deadline, thus removing this option and forcing you to find the hard cash to pay the liability.
Is there any way of figuring out which set of figures is correct?
The NHS pension agency uses the opening and closing statements as the basis of the annual allowance figures.
But what do you do when you have different figures?
We were able to calculate the superannuated income using the annual allowance as the foundation. We had to do this for each of the differing letters. Using payslips we were then able to confirm the superannuated income and match it to the closest annual allowance statement. Not the simplest process!
We then contacted the NHS pensions agency to confirm the position and, where applicable, contact the accountant if any adjustments needed to be made.
Looking to the future
We suggest that our clients regularly request their annual allowance figures. It allows us to build a picture an identify any discrepancies. You can request the annual allowance statement via email from the NHS even though they are not due out until later in the year.
Your Legal & Medical adviser is always available to help if you need a little guidance.
Do your annual allowance statement figures differ? Let us know by adding a comment below.