If you exceed the Annual Allowance and a tax charge is due, you can ask Civil Service Pensions to pay the charge on your behalf in exchange for a reduction in your benefits. This is called Scheme Pays.

There are two types of Scheme Pays: Mandatory and Voluntary

Mandatory Scheme Pays

Can be used if all three of these apply to you:

  • your Pension Input Amount within a single Civil Service Pension Scheme is in excess of £40,000, and
  • the tax charge resulting from the excess within that scheme is over £2,000, and
  • your Scheme Pays deduction is applied to the benefits within that scheme only

Members with a tapered (reduced) Annual Allowance must have a Pension Input Amount in excess of £40,000 in one particular scheme (for example, alpha or classic) to use Mandatory Scheme Pays.

For members with current benefits in both Principal Civil Service Pension Scheme (NI) and alpha, if their Pension Input Amount in each scheme exceeds £40,000 then they may be able to use Mandatory Scheme Pays to pay the tax charge for one scheme. The remaining scheme would be paid on a voluntary basis. This facility would not be available for those with tapered Annual Allowance wishing to use Scheme Pays for their entire tax charge.

Voluntary Scheme Pays

Can be used if:

  • you don’t meet the Mandatory Scheme Pays criteria, but you still wish to pay your tax charge by Scheme Pays

Scheme Pays Quote Request Form  

If I decide to use Scheme Pays, what are the steps involved?

You’ll need to advise HM Revenue & Customs (HMRC). This should be done via your self-assessment.

Please note: To prevent late payment charges being imposed by HMRC, regardless of the Scheme Pays method used to pay your tax charge, we encourage you to take note of the Scheme Pays deadlines which can be found in the table below.

Key dates 

Action Deadline date
You receive a Pension Savings Statement By 6 October 2023

Members request a Scheme Pays quote request form  

Return to:

Civil Service Pensions (NI)
Waterside House
75 Duke Street
BT47 6FP
By 6 November 2023
We issue you with your Scheme Pays quote By 4 December 2023
If you decide to go ahead with using Scheme Pays, you should complete and return your Scheme Pays form accepting the quote  By 13 December 2023
We will process your Scheme Pays deductions By 16 January 2024
You should notify HMRC that you have a tax charge owing and inform them of your intention to pay it using Scheme Pays By 31 January 2024
If you are using Voluntary Scheme Pays, we'll pay your tax charge By 31 January 2024
If you are using Mandatory Scheme Pays, we'll pay your tax charge By 11 February 2025

Please note once we have received your application form, you won't be able to withdraw your application, as at this point we will adjust your benefits accordingly and the tax charge will be paid to HMRC on your behalf

Tax is your responsibility

If you do have a tax charge, you’ll need to follow the HMRC guidelines for calculating, declaring and paying any tax due.

There is information about Annual Allowance and Scheme Pays on the HMRC website

HMRC provide a calculator to help you work out if you have a taxable breach. The calculator can be found at: Pension annual allowance calculator

Tapered Annual Allowance

Individuals with adjusted income over £240,000 may be subject to a tapered (reduced) Annual Allowance.

Adjusted income is not based on your salary alone, if you have other sources of income you may need to include this when calculating your adjusted income.

Further information on how to calculate adjusted income and tapered Annual Allowance can be found at: Pension schemes - work out your tapered annual allowance

Back to top