A Scheme Pays election is where a member who is subject to an annual allowance (AA) charge, elects for the relevant pension scheme to pay the charge on their behalf.  The HSC Pension Service will only pay the AA charge if the scheme receives a Scheme Pay election notification and the member meets the mandatory requirements prescribed by HM Revenue and Customs (HMRC). Where a Scheme Pays election is made, the member’s benefits are reduced in line with factors provided by the scheme actuary.

There are two restrictions that apply to pension savings. These are:

    • the amount you can increase your pension value by in any one year – the Annual Allowance (AA) and
    • the amount you can have as a total value from all your pension savings in your lifetime – the Lifetime Allowance (LTA).

The Annual Allowance is commonly worked out by the growth in your benefits in a year. The AA limit covers all your pensions, except your state pension, therefore all other pension savings need to be added together. From 6th April 2014 the Annual Allowance reduced to £40,000 a year.




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