Scheme Pays

You’ll need to let HMRC know on your self-assessment tax return. You can find more information about paying your AA tax charge on the HMRC website.

You may be able to use your pension savings to cover the charge with Scheme Pays.

If you have enough unused AA to carry forward from the previous three tax years to cover the charge, you don’t need to complete a self-assessment tax return. Just keep a detailed record in case HMRC ask for more information in the future.

You may also wish to get some tax advice from a tax adviser.

Need some advice or guidance

If you want to seek guidance or take financial advice on the options available to you, visit the guidance and financial advice page. You’ll find a range of resources to support your planning and you can also find information on how to access an independent financial adviser.

Yes, as you’ll already have received tax relief on your contributions. It also reduces the benefits HMRC use to work out your Lifetime Allowance (LTA). And if you’re over the salary threshold, your employer’s contributions to the Investment Builder will also help towards paying your charge.

You can still pay the charge through your own savings. Or if you’re retiring and taking a one-off, tax-free (up to a limit) cash lump sum, you could put aside some of the lump sum to pay the charge.

Yes, as long as you let us know before you start taking your pension. This is so we can take off the correct amount before it starts being paid to you.

When you ask for a retirement quote, we’ll let you know what pension savings you've earned in that tax year (and the previous one if you haven’t had that information already). If your Annual Allowance (AA) tax charge is more than £1,000, you can let us know if you want to apply for Scheme Pays – we’ll send the form along with your retirement pack.

Unless you’re retired, you may not know whether you’ll need to pay an AA tax charge until the end of the tax year. You can submit your Scheme Pays notice before you retire based on the information you have at the time.

We’ll pay an estimate tax charge for you. If your charge is over this amount, you’ll need to make up the rest directly with HMRC. And if the charge is lower, you can ask HMRC for a refund.

To cover the charge, we’ll sell parts of your Investment Builder pot.

As the value of your pot changes every day, we can’t work out exactly how many units we need to sell to cover the charge. So we’ll sell off 10% more than we may need to make sure we have enough if the value of your pot changes. Any amount remaining over the tax charge will be reinvested for you. You’ll be able to see this in My USS.

We’ll only use your Retirement Income Builder benefits to cover the charge if you don’t have enough in your Investment Builder pot. It’ll be taken from your pension and one-off, cash lump sum. If you’re retiring, you can choose either your pension or lump sum to pay it.

We’ll work it out in the same way as if you want to change your pension into extra cash or vice versa. The AA tax charge is then taken from your pension as a regular amount.

You’ll find this information in your Annual Member Statement. If you’ve gone over the standard AA, you’ll also be able to see how much AA you’ve used over the last three years. So you’ll know whether you have any unused AA to carry forward to cover your tax charge.

You can also use our Annual Allowance Modeller.

Yes, because these benefits are based on your full salary – not just limited to your salary threshold.

If you’ve used some of your funds to pay a Scheme Pays charge in the past, we’ll take an amount off your ill health benefits or the benefits we pay out when you die.

Yes, as long as the charge relates to your USS benefits.

We can help you with details on your pension with us, but we can’t confirm details about pensions you may have with other schemes or if you have a Tapered Annual Allowance.

You may be able to do this. Please contact our Pensions Technical Team on 0151 556 0626 for more information.

HMRC rules give individuals a right to use Scheme Pays by the following 31 July if they get an Annual Allowance (AA) tax charge because they’ve gone over the standard AA of £40,000 and the tax charge is over £2,000. This is known as voluntary Scheme Pays.

We allow members to use Scheme Pays for AA tax charges subject to a Tapered AA or if the tax charge is over £1,000. To avoid being charged late penalties by HMRC, the tax charge needs to be paid by 31 January. So to make sure we can meet this target, we need your application by 15 December. This is known as mandatory Scheme Pays.

You can estimate your penalty for late self-assessment tax returns and payments at gov.uk.

There are two options available if you’d like to manage your tax charges:

• Voluntary Salary Cap
• Enhanced Opt Out