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Scheme Pays

Understand how you can use your pension to pay any Annual Allowance charges

Pension tax changes

The government has announced changes to pension tax allowances and charges, which may affect tax management measures that you’ve put in place or your savings decisions. Find out more in our pension tax update.

What is Scheme Pays?

If you go over your Annual Allowance (AA) and incur a tax charge, Scheme Pays allows you to use what you’ve built in your pension savings to pay the tax charge.

How it works

You would need to pay an AA charge if your pension savings in a tax year:

  • go over the standard AA (or your own Tapered AA) for that year
  • you don’t have enough unused AA from the previous three years to carry forward to cover the amount you’ve gone over by.

If you apply for Scheme Pays, we’ll take savings from your Investment Builder (defined contribution) pot to cover the AA charge. If you haven’t built up enough in your pot, your benefits in the Retirement Income Builder (defined benefit) will be reduced to pay the charge. This means that when you retire your USS benefits will be lower than would otherwise be the case, but it means you don't have to pay the tax charge yourself now.

Here’s when you can use Scheme Pays

You can ask us to pay your AA charge if both:

  • your AA tax charge is over £1,000
  • and the tax charge is based on the benefits and savings you’ve built up with USS (not with another pension scheme).

You can also pay part of the charge yourself and ask us to cover the remainder.

If you want us to pay an AA tax charge on your behalf, estimate what deduction will be made to your USS benefits by using our Scheme Pays Modeller.

Need a hand?

Sign up for a free Focus on Pension Tax webinar to learn more about pension tax, including USS specific tax mitigation options.

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.

How to apply

Got a question?

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