Annual Allowance Guide

The Annual Allowance (AA) is the maximum amount your pension can grow each year without incurring a tax charge. For the 2023/24 tax year: • Standard Annual Allowance: £60,000 • This applies across all your pension arrangements • Unused allowance can be carried forward from the previous three tax years • Exceeding the allowance may result in a tax charge The allowance may be reduced if you're a high earner (Tapered Annual Allowance) or have already accessed your pension flexibly (Money Purchase Annual Allowance).

Your Annual Allowance may be reduced (tapered) if your income exceeds certain thresholds: Threshold Income (2023/24): • £200,000 - If your income is below this, tapering won't apply • Calculate as: Total taxable income minus pension contributions Adjusted Income (2023/24): • £260,000 - Used to calculate your tapered allowance • Calculate as: Threshold income plus pension growth Tapering reduces your Annual Allowance by £1 for every £2 of adjusted income above £260,000: • Minimum tapered allowance: £10,000 • Maximum reduction: £50,000

NHS Pension growth (Pension Input Amount) is calculated as: Opening Value: • Previous year's pension × 16 • Plus any lump sum • Increased by CPI Closing Value: • Current year's pension × 16 • Plus any lump sum The difference between these values is your pension growth for the year. Important considerations: • Promotions can significantly increase pension growth • Additional sessions/overtime affect the calculation • Multiple roles may increase growth • McCloud remedy choices may affect historical calculations

If you exceed the Annual Allowance and face a tax charge, you have two Scheme Pays options: 1. Mandatory Scheme Pays: • Available if your NHS pension growth exceeds £40,000 • Must elect by 31 July following the tax year • NHS Pension Scheme pays the full charge 2. Voluntary Scheme Pays: • For charges due to tapered allowance • Or when growth is below £40,000 • Earlier deadline of 31 March • Can be used alongside Mandatory Scheme Pays Both options reduce your future pension benefits to offset the tax paid.

Important dates for Annual Allowance considerations: • 6 October: Pension Savings Statement issued if growth exceeds £40,000 • 31 January: Self-Assessment tax return deadline • 31 March: Voluntary Scheme Pays election deadline • 31 July: Mandatory Scheme Pays election deadline You can request a Pension Savings Statement even if your growth is below £40,000.

Steps to manage your Annual Allowance: 1. Monitor your pension growth: • Request annual statements • Track additional income • Consider impact of promotions 2. If approaching or exceeding allowance: • Calculate tax charge • Consider Scheme Pays options • Seek financial advice 3. Keep records: • Pension statements • Tax returns • Scheme Pays elections • Carry forward calculations