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Pension Services

Pension Services. Pension Tax Relief Limits Implications to High Earners NHS January 2013. Pension Services. Today’s Presenters Fenella Needham UCL Pensions Manager Gary O’Neill Austin Chapel Independent Financial Advisers. Pension Services. Agenda Introduction & Background

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Pension Services

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  1. Pension Services Pension Tax Relief Limits Implications to High Earners NHS January 2013

  2. Pension Services Today’s Presenters Fenella Needham UCL Pensions Manager Gary O’Neill Austin Chapel Independent Financial Advisers

  3. Pension Services Agenda • Introduction & Background • Legislation & Scheme Rules update • Annual Allowance (AA) & Lifetime Allowance (LTA) – how calculated • The impact of a large salary increase & actions to consider to remove or reduce a tax charge • Carry forward • Your responsibilities • NHS’ responsibilities • How a tax charge can be paid • Will you need financial Advice? • Further guidance & outcomes of today • Questions & Answers

  4. Pension Services Introduction & Background • Recap of UCL activities: Presentations, communications • Dedicated area on websites – UCL Pension Services – Tax Relief Limits • NHS Pension Scheme – Members area – Pensions & Tax • Why you’ve been invited today • Awareness of evolving legislation and scheme rules’ changes • Objective and outcomes of today’s presentation

  5. Pension Services Legislation & Scheme rules update • Finance Act 2006 –‘A’ Day, 6th April 2006, Introduction of 2 new limits: various Annual Allowance (AA) and Lifetime Allowance (LTA) • Finance Act 2011- AA reduced to £50k (was £255k) from 6th April 2011- LTA reduced to £1.5m (was £1.8m) from 6th April 2012 • HM Treasury Autumn Statement (5th December 2012) - AA reduces to £40k (from £50k) from 6th April 2014 - LTA reduces to £1.25m (from £1.5m) from 6th April 2014

  6. Pension Services Annual Allowance (AA) – how calculated The AA measures the increase in the value of a member’s benefits over the course of a 12 month period know as the Pension Input Period (PIP). For the purposes of calculating the AA, the NHS PIP is from 1 April to 31 March and is the value of accrual using pensionable service and pensionable salary over the course of a PIP which is measured against the AA using a set formula.

  7. Pension Services Annual Allowance – where to start • NHS Pension Scheme website – Members area – Pensions & Tax • AA Estimator Tool • Factsheets • FAQs • Factors / Events which influence – impact on AA calculations • See handout - CPI • Make request to UCL Pension Services: pensions@ucl.ac.uk

  8. Pension Services The impact of a large salary increase • Large salary increase during the PIP year at same employer or as a result of moving between 2 NHS employers • Increases in pensionable salary result in a direct increase to the AA value, as its based on all your service in the NHS Pension Scheme at that point. • Member would not normally exceed the AA limit and incur a charge • All is not lost – various mechanisms/options to consider • Carry forward mechanisms • Review level of Money Purchase AVCs • Opt out of the NHS Pension Scheme (Caution!) • Scheme Pays • Pay the charge

  9. Pension Services Application of a back-dated Pay Award • Back-dated pay awards effective in a prior PIP tax year • When a backdated salary award is paid to a member, it is taken into consideration for annual allowance purposes only in the year in which NHS is notified of the award, ie the year it is awarded • For the PIP prior to the one in which the award is notified, the opening and closing values are calculated based upon the original, lower salaries which were in place prior to the backdated award. • For the calculation of the opening value of the PIP in which the award is notified to NHS it is similarly ignored.  However for the calculation of the closing value, the backdated salary award is considered in full - ie the new, higher salary is treated as if it had been in place since the date it was backdated to.

  10. Pension Services Carry Forward • HMRC mechanism - A member can carry forward any un-used AA in the previous 3 years and use to off-set in the current year • If an individual has an AA value of more than the current AA limit of £50k, 2011/2012 (£40k, 2014/15 onwards), there may still NOT be a charge payable • This may be the solution for many members who have unused previous years’ allowances to reduce or remove a charge • HMRC web – Annual Allowance guidance

  11. Pension Services NHS Money Purchase AVCs (Prudential or Standard Life) • Contributions paid in a PIP year from April to March • Paying large amounts or paid lump sum in March • Consider reducing/suspending for the remainder of the PIP year • Review position at start of new PIP year • Contact Insurance Company directly

  12. Pension Services Members’ responsibilities • Personal taxation matter • Responsibility of the employee to manage their own allowances and tax position • Provide the required notification to HMRC of a potential charge • Completion and submission of any HMRC Self Assessment Tax Return (SATR) • UCL: provide you information, where to find out what you need to know & when you need to do it, and who to inform • Declare & Pay any AA charge • When you receive your Pension Savings Statement (PSS) – check it!

  13. Pension Services NHS Pension Scheme’s Responsibilities • Statutory Deadline 6 October 2013 • Calculations run across the NHS membership • Full pensionable service & salary history • NHS will provide a Pension Savings Statement (PSS) for those whose AA value in the current year exceeds the AA limit • For those cases, automatically produce 3 prior PIP years • Using Carry Forward and other mechanisms may result in there being no tax charge payable

  14. Pension Services How a Tax Charge can be paid • Self Assessment Tax Return (SATR) • Under £2k will be expected to be paid immediately • HMRC web – Information, deadlines etc • Wait for HMRC to send you the invoice/bill to pay the charge • Scheme Pays • NHSPS web - Pensions & Tax – AA - Scheme Pays Facility Factsheet • 3 main conditions the individual must meet • Permanent & irrevocable reduction to benefits, and increases year by year to retirement • Inform HMRC of this option

  15. Pension Services Opting out of the NHS Pension Scheme • If you are considering opting-out of the NHSPS, you must evaluate the impact of taking this action – STOP! THINK! Implications! Caution! • Know what benefits you are giving up • Weigh up the value of the loss of benefits against any charge payable • The knock-on effect of your eligibility to rejoin the NHS Pension Scheme at a later date if employed at a Directions employer • Seek Independent Financial Advice! • Weigh up tax charge vs potential loss of benefit

  16. Paying an AA Tax charge (AAC)

  17. Pension Services Life Time Allowance (LTA) • Reduced to £1.5m (from £1.8m) with effect from 6th April 2012 • Reduces to £1.25m (from £1.5m) with effect from 6th April 2014 • A limit on the total value of all pension benefits before any tax charge, value determined on a Benefit Crystallisation Event (BCE) • Any excess over the LTA is subject to a tax recovery charge of 55% if taken as a lump sum, 25% (in addition to the ordinary marginal income tax rate) if taken as pension • Some transitional Protection available – Primary (PP), Enhanced (EP) and Fixed (FP) - no longer able to apply for these • Details of “Fixed Protection 2014” – Summer 2013

  18. Pension Services Life Time Allowance – calculation On a BCE, LTA equals total of : 1. NHS Pension pa x 20 2. NHS cash 3. Any pre-2006 pension pa already in payment x 20 4. Any lump sum received from a previous BCE 5. Fund value of any Defined Contribution (DC) schemes (personal/group pensions) 6. Fund value of any AVC, FSAVC or other registered pension plans

  19. Pension Services Life Time Allowance – things to consider • If you have any transitional protection, make sure you know the level of your protection and what actions are permitted to ensure cover is not lost • NHSPS web - Pensions & Tax - LTA • Review levels of Money Purchase AVCs & non-NHS benefits • Check the Pension Savings Statement (PSS) issued by NHS • Impact of a salary increase • Opt out of NHSPS – STOP! THINK! Implications! Caution! • Review retirement plans – when & how • Seek Independent Financial Advice! • NHSPS web – Pensions & Tax – Independent Financial Advice

  20. Looking ahead…… 2012/13 Tax Year Not much time left! Have you done your figures? Need any information? Do you need an IFA? 2013/14 Tax Year - Summer 2013: Finance Bill 2013 comes into force - Provision of Pension Savings Statement (PSS) by 6th October 2013 2014/15 Tax Year - AA reduces to £40k - LTA reduces to £1.25m - PSS issued Identify actions you may need to take Know where to find the information needed for your decision making Deadlines: “Applications for Fixed Protection 2014”, Forms to schemes, HMRC etc Payroll related actions: be mindful of each March (Tax Period 12) payroll cut-off Pension Services

  21. Pension Services Will I need Financial Advice? • Why do I need to seek Independent Financial Advice? • Where do I find out details of Independent Financial Advisors (IFAs)? • With effect 1 January 2013 – big changes to the way you get financial advice: • Know how much the advice will cost • Know what you are paying for • Get improved professional standards • Have confidence & trust in financial advice; increased transparency

  22. Pension Services Independent Financial Advice – Why • UCL Pension Services & NHS can: • provide information about the scheme and your benefits • clarify technical issues/queries • direct you to where guidance / information is located to enable you to make an informed decision about the options available / choices facing you • but CAN NOT give financial advice • Complex matters, difficult decisions to make, its natural you will want help in making a decision which is best for you • You should seek advice as your net benefits, even after a potential tax charge, may be greater than the net cost of the contribution paid by you. • Identify / discuss your retirement objectives

  23. Pension Services Independent Financial Advice – Where • NHSPS web - Members area – Independent Financial Advice • Unbiased.co.uk – Use their search service, tick your requirements and receive details of advisers close to your home or office • Alternative arrangements for the provision of advice may be provided by your employer (as set out on the NHSPS web) • Help from other organisations • BMA • Money Advice Service “Do you need a Financial Advisor?”

  24. Things to consider – Financial advice • Over 16 years experience of advising Higher Education professionals. • Provide a ‘financial advice in the workplace programme’ for Queen Mary, University of London and The University of Northampton • Pre and post retirement advice for individuals in order to maximise pension benefits and mitigate taxation. • Investment advice and management service which includes a review of existing investments held and also recommendation of suitable future investments. • Individual meetings can be held at the work place or at your home. Austin-Chapel Independent Financial Advisers LLP

  25. Pension Services Further Information & contacts • UCL Pension Services web: www.ucl.ac.uk/hr/pensions • Tax Relief Limits, Guidance Note, Contacts details • NHSPS web: www.nhsbsa.nhs.uk • Members area – Pensions & Tax • Factsheets, FAQs, Estimator Tools etc • Austin Chapel Independent Financial Advisors – Gary O’Neill • gary.oneill@austinchapel.co.uk Mobile: 07860 240855

  26. Pension Services Outcomes of today’s presentation • Good or better understanding of the AA/LTA • How calculated & what factors influence the calculations • Aware of your responsibilities & timescales • Know where to locate information, who you should ask • Know why you may need to seek independent advice • What will be the 1st action you take after leaving this room? • What are your plans in preparation for April 2014? • Further communications

  27. Pension Services QUESTIONS?????

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