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Pensions, tax and 'A-Day'

18 April 2006 - 5:10pm

A query on tax, pensions and 'A-Day' is answered here...

Question

I have a scenario where staff retiring after 5 April are not going to receive their pensions (or lump sum) because of 'A-Day' [*see note below for an explanation of 'A-Day'] altering tax on pensions, which are instructions from the Inland Revenue.

I have two physio staff who are affected and even our finance director has contacted the Pensions Agency and the Inland Revenue and they won't even give him an estimation of when this will be sorted out. The PCT is going to estimate the amount payable and pay the staff until they receive it, at which point they will pay back the trust.

Other staff across the country may be affected by this. If so, what should they do?

Answer

This issue has been raised with the NHS Pensions Agency (anonymously), who replied that:

'The relevant form to claim the NHS Pension is called the AW8. It has recently been amended to incorporate Lifetime Allowance, tax, 'A-Day' etc. However, we've had approximately 800 pension applications on old AW8 forms that don't have the LTA, tax and 'A-Day' information on them so we had to send out a special form to these people for them to complete before we could award the pension. All those who have completed the form correctly and returned it are now getting their pensions awarded on time. There are, however, a few stragglers due to Scheme members not yet returning the form...'

In light of the above comments from the NHS Pensions Agency the best advice we can give is to ensure that up-to-date forms are being used and are completed correctly.

* 'A-Day'

6 April was Pensions 'A-Day' - the day that the numerous tax rules governing pensions were replaced by a single regime. The new regime is designed to make pensions more understandable, making it easier for those already saving for retirement and more accessible for those thinking of doing so.

Under the new rules, people will be able to save in more than one pension scheme for the first time. There is no limit on the amount of money you can save in a pension scheme, or the number of pension schemes you may take out - although there are some limits on the amount of tax relief you can receive.

Under the new rules, tax relief will be given on amounts up to £215,000 per annum or an individual's total yearly salary, whichever is the smaller. A Lifetime Allowance - £1.5 million rising to £1.8 million in 2010 - will also apply to tax relief available.

There are some people with pension savings greater than the new Lifetime Allowance who would be liable  to tax charges when they retire. However, protection from these charges is available. In order to protect pre-'A-Day' rights people should notify HM Revenue and Customs (HMRC) using form APSS200 before April 2009. Those affected may wish to seek financial advice.

HMRC has produced guidance on pensions tax simplification in addition to regular newsletters and factsheets for individuals, employers and those affected by international issues. You can find all these by visiting HMRC's website at www.hmrc.gov.uk/pensionschemes. Further information is also available from the HMRC pensions helpline on 0115 974 1600 (9am-5pm, Monday-Friday). 

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