Scheme Pays and Annual Allowance?
KellySelby
Member
Hi. I've been tasked to find an answer to the question below and wonder if anyone can help or point me in the right direction? This is from the adviser, so hopefully it makes sense to someone!
'If Scheme Pays has been used and a pension income debit calculated at the time (like LGPS and TPS do) is that debit then used in the AA calculation and if so in future calculations as it increases and if more than 1 scheme pays debit then cumulatively?
LGPS statement seems to include however I’ve not seen the same from TPS before. NHS hold the debit as the tax amount until benefits are drawn at which point they convert it so it wouldn’t be included earlier.
It wouldn’t make any difference I don’t think if both debit and benefit increase by the same amount however with TPS the debit increase by CPI but the accrued CARE benefit for example goes up by CPI+1.6% whilst an active member however, as Start Value increases also by CPI then even here I don’t know that it would make any difference
So it may simply be the way that the LGPS statement shows the debit'
Thanks
Comments
Hi,
Here is the LGPS regulations site with all the guides, including annual allowance:
https://www.lgpsregs.org/resources/guidesetc.php
Here's a similar page for the TPS:
https://www.teacherspensions.co.uk/members/resources/factors.aspx
I'm not sure you'll get the same detail for TPS, but looking at those factors it costs a lot of pension to have TPS pay the charge. I'd be very careful around actively recommending using, or not using, scheme pays in a public sector DB scheme (although you did say it had already been done - it doesn't look like good value).
Thanks @benjaminfabi, this is very useful! I'll have a read through these.
On the advice side, I'm not sure what's been advised so far or if this is following up after the fact, perhaps with a new client, which I suspect may be the case (not one I'm actively working on, but I'm still asked the questions!)