Pensions - Articles - Call for Voluntary Scheme Pays clarification for NHS workers

Royal London has renewed its call on government to urgently clarify Voluntary Scheme Pays rules in England and Wales to ensure all overstretched NHS workers have much needed breathing space to resolve their pension tax affairs for 2018/19 before the current deadline of July 31st.

 Scheme Pays is a process that allows an individual to pay an annual allowance charge from their pension scheme. As the charge is taken from the individual’s pension it means they don’t have to find the money to pay the tax charge themselves. 

 If the annual allowance charge is more than £2,000 and pension saving under the scheme exceeds the annual allowance then the member can use Mandatory Scheme Pays and the scheme must pay the charge in this way. If not, then the scheme can still agree to settle the member’s charge from their pension although it is under no obligation to do so. This is known as Voluntary Scheme Pays.
 In May the government announced it would extend the deadline for Voluntary Scheme Pays for tax charges related to 2018/19 until October 31st in England and Wales in recognition of the demands on NHS workers at this time. The Mandatory Scheme Pays deadline remains July 31st. However, it did not clarify if members meeting the conditions for Mandatory Scheme Pays could go down the Voluntary Scheme Pays route if they miss the 31st July deadline. At this time Scotland had not announced any deadline extension.
 The mutual insurer wrote to the Secretary of State for Health and Social Care to clarify whether NHS scheme members missing the mandatory deadline could benefit from the breathing space of the voluntary deadline concession to resolve their pension tax affairs. It also called on Scottish ministers to implement a similar concession.
 On July 17th the Scottish government responded to say that not only had the Voluntary Scheme Pays deadline been extended but that those who meet the conditions for Mandatory Scheme Pays but who miss the deadline can use Voluntary Scheme Pays instead.

 Moira Warner, senior intermediary development and technical manager at Royal London, said: “We welcome the clarification from the Scottish government which will really help over stretched NHS workers by giving them much needed breathing space. However, the clock is ticking and we urgently need similar clarification that the same situation applies in England and Wales.
 “As it currently stands those scheme members in England and Wales who qualify for Mandatory Scheme Pays risk having to pay a tax bill potentially running into thousands of pounds from their own pockets if they miss the 31st July deadline. Extending them the opportunity to make use of the Voluntary Scheme Pays route will save them a lot of time, money and stress at a time when they are carrying out such an important role on the frontline of tackling the Coronavirus pandemic.”

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