Nhs Pension Scheme · CAS-60994-H2H2

CAS-60994-H2H2

Ombudsman’s Determination Applicant Dr S

Scheme NHS Pension Scheme (the Scheme)

Respondents NHS Business Services Authority (NHS BSA)

Outcome

Complaint summary Dr S has complained that NHS BSA has failed to send him a Pension Saving Statement (PSS) automatically for the tax years 2016/17, 2017/18 and 2018/19.

Background information, including submissions from the parties Dr S was a member of the 2008 section of the Scheme (the 2008 Section) and the separate 2015 NHS Pension Scheme (the 2015 Scheme).

A PSS must be sent to a member when they exceed the standard Annual Allowance (AA) 1 which was £40,000 in the tax years 2016/17 to 2018/19. In most circumstances that must be provided no later than 6 October in the following tax year. A PSS must also be sent to a member if they ask for one, whether or not they have exceeded the AA. In that case it must generally be provided within 3 months of the request (or, if later, 6 October in the following tax year). However, in either case, the law recognises that administrators rely on information provided to them by the member’s employer, and so the PSS will only need to be provided within 3 months of the necessary information being received 2. Further detail is set out in Appendix one.

1 The Annual Allowance is the amount a member can save in their pension ‘pots’ in a tax year before they

have to pay tax. In very broad terms, for a defined benefit scheme, the AA is calculated by comparing the opening and closing values of a member’s pension benefits over a tax year. The difference in the opening and closing values is the pension growth over the tax year and it is this increase in value that is compared against the AA. 2 Regulations 14A(6) and 14B(3) of The Registered Pension Schemes (Provision of Information) Regulations

2006. 1 CAS-60994-H2H2 On 24 November 2018, Dr S’ financial adviser sent an email to NHS BSA and asked for a PSS for the 2016/17 and 2017/18 tax years.

On 5 December 2018, NHS BSA sent Dr S a PSS for the 2015 Scheme for the tax year 2017/18. The 2008 Section PSS for the tax year 2017/18 and the PSS for the 2008 Section and 2015 Scheme for the tax year 2016/17 were not issued.

On 1 January 2019, Dr S’ financial adviser sent an email to NHS BSA and said that Dr S had not received his 2008 Section PSS for the 2017/18 tax year or his PSS for both the 2008 Section and the 2015 Scheme, for the tax year 2016/17.

On 9 January 2019, NHS BSA sent an email to Dr S’ financial adviser and confirmed a copy of the 2017/18 PSS for the 2008 Section would be sent to Dr S but there was a three month timescale for providing the 2016/17 PSS. Dr S’ financial adviser responded that in view of the fact that the 2016/17 PSS had originally been requested in November 2018, he expected a quicker response.

On 28 February 2019, Dr S opted out of the 2015 Scheme.

On 25 March 2019, NHS BSA sent Dr S his PSS for the 2015 Scheme for the tax year 2016/17. The cover letter said in summary:-

It was writing to him with important information about his pension savings in the 2015 Scheme and HM Revenue and Customs (HMRC’s) AA rules for the tax year 2016/17.

The AA was the maximum amount of pension growth he could receive tax relief on each year. If his pension savings were more than the AA, he may have to pay tax on the excess amount. The AA was currently £40,000.

He needed to work out whether he had a tax charge to pay.

He had been sent a PSS for one of the following reasons:-

Growth in his 2015 Scheme benefits exceeded £40,000.

He was a transition member with pension entitlement in both NHS Pension Schemes and the combined growth in his NHS benefits across both the 2008 Section and the 2015 Scheme exceeded £40,000. He would receive a separate statement from each Scheme.

He had requested an “On Demand” statement.

The figures provided were:-

Pension Input Pension Input Annual Allowance Pension Input period start period end Amount (Growth)

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06/04/2016 05/04/2017 £40,000 £24,092.64 *Information about previous years was also provided.

The same day, NHS BSA sent Dr S his PSS for the 2008 Section for the tax year 2016/17. The cover letter reiterated the same information as the PSS for the 2015 Scheme. The following figures were provided:-

Pension Input Pension Input Annual Pension Input period start period end Allowance Amount (Growth)

06/04/2016 05/04/2017 £40,000 £37,933.30

In September 2019, Dr S telephoned NHS BSA to ensure he received his PSS for the 2018/19 tax year. He was assured he would receive a PSS if his pension growth exceeded £40,000.

In October 2019, Dr S telephoned NHS BSA as he did not receive a PSS for the 2018/19 tax year. He was advised that NHS BSA did not receive details from his Trust in time and it was unable to calculate the AA amount. He was told that it would be ready in three months’ time. He was also informed that he would receive the PSS by 26 December 2019 and if he had not received it by then he should contact NHS BSA.

On 27 December 2019, Dr S telephoned NHS BSA as he had not received his PSS. He was advised that it had no information about his PSS. It told him that the problem would be escalated, and he would receive the statement in ten working days. It also advised him to contact its AA department separately to ensure that it was aware of his need for the PSS.

On 1 January 2020, Dr S sent an email to the AA department that said he required a PSS.

On 2 January 2020, Dr S received a notification by email from the AA department that said his email of 1 January 2020 had been deleted without being read.

On 13 January 2020, Dr S had not received his PSS and so he telephoned NHS BSA who provided him with the figures over the telephone. He was advised that these were not final figures. Dr S was informed that the finalised figures should be with him by the end of the week which was 17 January 2020.

On 20 January 2020, Dr S telephoned NHS BSA as he had not received the PSS. NHS BSA said the final figures could not be provided yet as they were only being worked on that afternoon. It advised Dr S to telephone again if he did not receive the figures within the next few days.

3 CAS-60994-H2H2 On 23 January 2020, Dr S’ PSS for the 2008 Section and the 2015 Scheme, for the 2018/19 tax year were received in the post, the letters were dated 3 January 2020. The figures provided were:-

Pension Input Pension Input Standard Annual Pension Input Period Start Period End Allowance (across all Amount (Growth) in of your pension the 2008 Section schemes)

06/04/2018 05/04/2019 £40,000.00 £25,222.44

Pension Input Pension Input Standard Annual Pension Input Period Start Period End Allowance (across all Amount in the 2015 of your pension Scheme schemes)

06/04/2018 05/04/2019 £40,000.00 £26,592.43

On 27 January 2020, Dr S sent two complaint emails to NHS BSA. The email regarding complaint one said in summary:-

He wanted the matter investigated and for NHS BSA to address the concerns he had regarding the delivery of his PSS for the tax years 2016/17 and 2017/18.

Due to the introduction on taxation on excess pension growth his understanding was that NHS BSA had undertaken to ensure that members were kept fully informed about their potential tax burden.

His understanding was that because the calculations that were required to produce the AA figures were complicated NHS BSA would contact members when their pension growth exceeded the AA limit of £40,000. This was confirmed on the website: https://www.nhsbsa.nhs.uk/member-hub/annual- allowance

His complaint stemmed from the fact that he did not receive the PSS from the 2016/17 tax year where his pension growth was £60,612. He also did not receive his PSS for the 2017/18 tax year, when he should have. The pension growth in that tax year was £46,095,65. Both of these figures clearly exceeded the AA limit of £40,000.

This failure on the part of NHS BSA to send him the relevant PSS meant that he was unable to avoid exceeding the AA in the 2017/18 and 2018/19 tax years. If 4 CAS-60994-H2H2 he had been informed about exceeding the AA, he would have sought professional advice earlier and left the pension scheme sooner. If this had happened, he would not have had to pay the several thousand pounds excess tax last year and the almost £5,000 excess tax this year, solely due to the excess growth in his NHS Pension.

The email regarding complaint two contained a timeline of Dr S’ request for his PSS for the tax year 2018/19 and it said in summary:-

NHS BSA had entirely failed to keep to its stated three months in delivering the PSS. It then failed to deliver the statement according to the second deadline of ten working days. This left him in a very difficult position of trying to prepare a tax return on uncertain figures.

The fact that he was advised to contact the AA department directly and it deleted his email without reading it was unacceptable. There also appeared to be a communication breakdown between departments as one department promised something that the other one did not deliver.

He wanted to know:-

Why his PSS was not produced within the deadlines that NHS BSA set itself.

Why his email to the AA department was deleted without being read. This was not only rude but was unprofessional.

Why his PSS was dated 3 January 2020 when he was consistently told that even provisional figures were not available.

On 10 March 2020, NHS BSA replied to Dr S’ complaint under stage one of the Scheme’s Internal Dispute Resolution Procedure (IDRP). It said in summary:-

Where a member had exceeded the AA, provided it received the annual update of pay and pension information from their employer by 6 July, it would issue a PSS by 6 October.

This was the deadline set by HMRC for it to send statements to members. If the employer did not give it the information needed until after 6 July it would issue the statement within three months of the date the information was received.

A member who did not exceed the AA could ask NHS BSA to provide a PSS. In such circumstances, as long as it received the request before 6 July, it would issue the statement by 6 October. If it received the request after 6 July, it had up to three months to issue a statement.

Producing the 2016/2017 PSSs

5 CAS-60994-H2H2 Dr S’ financial adviser requested PSSs for the 2016/17 and 2017/18 tax years in November 2018. The PSSs for the 2017/18 year were provided but it did not issue the 2016/17 PSS.

The PSSs for the 2016/17 tax year were issued on 25 March 2019.

It was upholding this part of his complaint as Dr S’ combined 2008 Section and 2015 Scheme pension input figures for the 2016/17 year exceeded the AA. His 2016/17 statement should have been provided automatically following the update to his pension record by his employers on 20 April 2017.

It apologised for the failure to adhere to its normal procedures.

Producing the 2018/19 PSSs

Dr S had telephoned NHS BSA on 26 September 2019, to request a PSS for the 2018/19 year. Dr S said that the statement should have been provided automatically as he had already exceeded the AA. When he telephoned again, NHS BSA explained that it did not receive the 2018/19 update of pay and membership information from his employers until 13 September 2019.

The 2018/19 PSSs were produced on 3 January 2020 and referred to the checking team for a “Quality Assurance” check. The check was completed on 20 January 2020 and the PSSs were issued on that day. He had exceeded the AA, and it was upholding this part of his complaint as his PSSs were issued more than three months after the date on which it received the update from his employers.

It apologised for the delay.

On 30 March 2020, Dr S sent an email to NHS BSA and said he was not happy with the complaint response and asked that his complaint be escalated to the next stage.

On 1 April 2020, Dr S rejoined the 2015 Scheme.

On 20 May 2020, NHS BSA replied to Dr S under stage two of the IDRP. It said in summary: -

The legislation governing the provision of a PSS was confirmed in The Registered Pension Schemes (Provision of Information) Regulations 2006 – SI 2006/567. Regulations 14A and 14B confirmed when a PSS must be sent, which was either because a member had exceeded the standard AA which was currently £40,000 or because a PSS had been requested.

HMRC also provided guidance in the Pension Tax Manuals at PTM051700 and PTM167100. These confirmed that NHS BSA must provide a PSS to a member who exceeded the standard AA by 6 October following the end of the relevant 6 CAS-60994-H2H2 tax year provided all the information required to undertake the calculations to confirm the Pension Input Amount was available.

If the information required to establish if the member had exceeded the AA had not been received, then NHS BSA had three months from the date all the necessary information was received to provide a PSS.

There were two separate NHS Pension schemes that NHS employees could be a member of, and each scheme was registered separately with HMRC and had different Pension Scheme Tax Reference numbers.

Each separate scheme had to provide a PSS if a member exceeded the relevant AA amount. There were no legislative requirements for NHS BSA to provide a member with a PSS for either scheme where that member did not exceed the AA. However, NHS BSA aimed to better the legislative requirement by providing PSS to members if their growth in either scheme, when combined, exceeded the AA.

From 2015/16 Dr S had the following Pension Input Amounts in the two separate NHS schemes:-

Pension Input Pension Input Pension Input Total Period Amount Amount

2008 Section 2015 Scheme

06/04/2018 to £25,222.14 £26,592.43 £51,814.57 05/04/2019

06/04/2017 to £18,602.91 £27,492.74 £46,095.65 05/04/2018

06/04/2016 to £36,498.24 £24,113.76 £60,612.00 05/04/2017

06/04/2015 to £48,807.81 £20,260.64 £69,068.45 05/04/2016

As confirmed by the above table there was no legislative requirement for NHS BSA to provide Dr S with PSSs for either of the separate NHS Pension schemes from the 2015/16 to 2018/19 tax years.

7 CAS-60994-H2H2 Dr S requested the PSS for the tax year 2018/19 on 26 September 2019, and it was not issued until 23 January 2020. It apologised that Dr S was not sent this PSS within the legislative deadline confirmed in regulation 14B of The Registered Pension Schemes (Provision of Information) Regulations 2006.

Following the complaint being referred to The Pensions Ombudsman, NHS BSA and Dr S made further submissions that have been summarised below.

NHS BSA submissions

Dr S had not exceeded the AA amount from the 2012/13 to 2018/19 tax years in either NHS Scheme and so NHS BSA did not have to provide him with a PSS on a legislative basis by 6 October for the appropriate year.

If a member requested a PSS, then NHS BSA had up to three months to provide this provided all the information to calculate the PSS was available and the request was received on or after the 6 July.

Dr S opted out of the 2015 Scheme with effect from 1 March 2019 and opted back into the 2015 Scheme from 1 April 2020. This meant a PSS was not due for the 2019/20 tax year, as Dr S did not exceed the AA within either NHS Scheme.

A request for a PSS was received on 24 November 2018 and the PSS for the 2017/18 tax year was dated 5 December 2018, this included information for the 2016/17 tax year. This meant Dr S could have left the Scheme from 1 January 2019 and paid 2 months less contributions and accrued 2 months less growth.

A further request for a PSS was received on 26 September 2019 for a PSS for the 2018/19 tax year but a response was not sent within the three month deadline set in legislation for an on demand PSS (regulation 14B of The Registered Pension Schemes (Provision of Information) Regulations 2006 refers). In the IDRP stage two decision, NHS BSA apologised for its failure to issue the PSS on time.

AA charge

Dr S has confirmed that he has incurred an AA charge for the 2017/18 and 2018/19 tax years. From the information it had, Dr S should have sufficient unused AA from the three previous Pension Input Periods to carry forward and to offset, in full, the AA charge in 2017/18.

It was possible that Dr S had accrued an AA charge for the 2018/19 tax year. However, he had not made a scheme pays election to repay this charge.

NHS BSA was not a financial adviser and did not have access to any information about members other pension provision, individual taxable income, or their tax position. It noted that Dr S confirmed that he was given financial advice to opt out of the 2015 Scheme. NHS BSA would expect that the advice would include information about the:

8 CAS-60994-H2H2 • loss of accrual in pension rights while not a member;

• reduction in ill-health and death cover from this Scheme while opted out as well as the cost of replacing this cover; and

• loss of contributions paid to this Scheme from the NHS employer.

Deleted e-mail

In respect of the deleted e-mail of 1 January 2020, it had asked for the receiving e- mail account to be checked and as expected the deleted e-mail was not there. It could not provide an explanation as to why the e-mail was deleted and if it was due to human or computer error.

Dr S’ submissions

He was not an expert in either tax or pension legislation, so he was not in a position to question the exact nature of the legislation that NHS BSA was using to defend its actions. He could however, present what it said it would do. It said that it would send a PSS if the total growth across both the 2008 Section and 2015 Scheme exceeded the AA but it did not do so.

This was the commitment that NHS BSA made to members. He had a screenshot from the website in 2020 (Appendix two). If NHS BSA had done what it said it would do, then he would not have faced such a large tax bill.

NHS BSA has not recognised the stress and anxiety the late provision of the PSS caused. He needed to submit tax information that was based on the PSS, and it only arrived days before the tax deadline.

Adjudicator’s Opinion

NHS BSA stated that as the 2008 Section and 2015 Scheme were separate arrangements it had no legislative requirement to send a PSS if Dr S did not exceed the AA in either of the schemes. In Dr S’ case, he had only exceeded the AA when the pension growth in both schemes were combined. While the Adjudicator noted that there was no legislative requirement, NHS BSA had committed to providing PSSs when the combined growth of the two schemes exceeded a member’s AA. This information was provided on the member website as shown in the screenshot in Appendix two, and it was also provided in the cover letters sent to Dr S on 25 March 2019 with his PSS for the tax year 2016/17.

9 CAS-60994-H2H2 In the Adjudicator’s opinion, based on the information provided to Dr S, it was reasonable for him to assume that the PSS would have been provided automatically when the combination of the growth in both schemes exceeded the AA. In the Adjudicator’s opinion, NHS BSA’s failure to provide the service set out on the website and in correspondence sent to Dr S was maladministration and NHS BSA should not have stated that it would provide PSSs automatically in circumstances such as Dr S’, if this was not something it could commit to.

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Dr S did not accept the Adjudicator’s Opinion, and the complaint was passed to me to consider. Dr S and NHS BSA provided further comments which do not change the outcome. I agree with the Adjudicator’s Opinion and note the additional points raised.

Dr S’ comments

He had suffered a financial loss, and it would have been possible to mitigate a tax charge. His reasoning was that in the 2016/17 tax year his Pension Input Amount in the 2008 Section was £37,933.20 and in the 2015 Scheme was £24,092.64. The total amount was £62,025.30 which was above the annual allowance. This should have initiated a Pensions Saving Statement that would have been sent out in October 2017.

This may have been too late to significantly impact any charges in association with pension growth accrued in the 2017/18 tax year but had the statement arrived when it should have done there are multiple measures that he could have taken to mitigate any annual allowance tax charge for the 2018/19 tax year. These included stopping the purchase of additional years and withdrawing from the pension for part of the year. This means that exceeding his annual allowance was avoidable.

For the 2018/19 tax year his Pension Input Amount in the 2008 Section was £25,222,44 and in the 2015 Scheme was £26,592.43. The total amount was £51,814.87 that is £11,814.87 above the Annual Allowance which incurs a tax payment of £4,725.98. This does not represent the entirety of his tax burden that he had suffered due to NHS BSA’s maladministration, but it was a clear and demonstrable financial loss that NHS BSA should make good.

He also noted that the McCloud Judgement 3 may have an impact on the figures he had presented, and he was concerned that he had not yet received information regarding this.

NHS BSA’s comments

The provision of a PSS to members whose Pension Input Amount from both schemes exceeded the AA was an aim and not a legislative requirement. There was no legislative deadline for issuing a PSS to a member who has exceeded the AA due to

3 In 2018, a judgment found that the government discriminated against younger members of public service pension schemes. The judgment, known as McCloud, resulted in the government making changes to public service pension schemes to remedy discrimination which had taken place. 11 CAS-60994-H2H2 the combination of growth in both Schemes. NHS BSA was not required to issue PSS by 6 October (2017) in these circumstances unless a member has made a request before 6 July (2017) of the relevant year, which Dr S had not made for 2016/17.

NHS BSA has apologised for issuing the 2018/19 PSS late after the request from Dr S. If the relevant PSS had been issued earlier, then Dr S could have used any or all of the following to reduce his Pension Input Amount:-

Ceased paying for additional membership.

Reduced his pensionable hours, and/or

Opted-out of the Scheme.

Dr S opted out of the Scheme on 28 February 2019 returning on 1 April 2020. Opting out of the Scheme caused all his contributions to cease, including the additional contributions he was paying. Opting out has caused Dr S’ retirement benefits to be permanently reduced.

Dr S has said he has suffered a financial loss of £4,725,98 but he has not provided any detail of the additional benefits he accrued by remaining in the Scheme for longer. Dr S was likely to receive more pension than any loss for paying an AA charge of £4,725.98 as he remained in the Scheme for longer. A calculation for Dr S’ possible additional pension is provided in Appendix Three.

Dr S has not confirmed if he made any payments to replace his ‘loss’ or confirmed the cost of what actions he took to make-up the loss of ill-health and death benefit cover while he was out of this Scheme. It could not agree that Dr S had lost £4,725.98 when compared to the greater benefits Dr S and/or any survivors may receive at a later date because he paid further pension contributions after 31 October 2018 (to 28 February 2019).

Dr S will receive a Remedial PSS with regard to the McCloud judgement and it had asked for this to be expedited.

Ombudsman’s decision NHS BSA has not automatically sent Dr S a PSS for the tax years when the combined pension growth in both the 2008 Section and 2015 Scheme exceeded the AA.

NHS BSA are correct in that there was no legislative requirement for them to do so as a matter of course, as Dr S remained below the AA for each individual scheme. However, it had stated that in circumstances such as this it would provide a PSS without the need to make a request. To not then do so amounts to maladministration.

Furthermore, there was also a separate requirement to provide PSSs on request within 3 months, once in possession of the relevant information required to prepare them. In the case of the 2018/19 PSSs this deadline was missed by almost a month. 12 CAS-60994-H2H2 The deadline also appeared to be missed in respect of the 2016/17 PSS 4, and NHS BSA apologised for that in its IDRP response – albeit it later argued that the necessary information had in fact been provided on time, although only by dint of it being included in the 2017/18 PSSs which were received earlier.

I agree with the Adjudicator’s opinion that NHS BSA’s failure to provide the service set out on the website, in the relevant regulations and in correspondence sent to Dr S was maladministration. However, I disagree with my Adjudicator that this falls within the ‘significant’ category for a distress and inconvenience award. Rather, as this occurred on several occasions, with breaches of both the legislation and the stated level of service set out on the website, my view is that this amounts to ‘serious’ distress and inconvenience, and so warrants an award of £1,000. The provision of a PSS is an important component that allows for the preparation of an individual’s tax return. A delay in providing the PSS until 23 January, just six working days before the self-assessment deadline, is clearly unacceptable and will have exacerbated any distress and inconvenience.

I have also considered Dr S’ argument that the maladministration has caused him an actual financial loss as he exceeded his AA in 2018/19 and so was liable for a tax charge of £4,725.98. However, I find that this is not an amount that NHS BSA should pay to Dr S. Dr S continued to make payments into the Scheme rather than opting out and so he will receive higher pension benefits as a result. For the reasons given by NHS BSA, I agree that it is likely that the level of pension benefits achieved will be higher than the tax charge.

Directions

Dominic Harris

Pensions Ombudsman 17 February 2025

4 The request was made on 24 November 2018 (see paragraph 5 above), with NHS BSA already in

possession of the information it required from the employer (see paragraph 23 above). However, the PSS itself was only sent on 25 March 2019 (see paragraphs 10 and 11 above). 13 CAS-60994-H2H2 Appendix one: Pension Tax Manual PTM051700– Annual Allowance: essential principles: information to member. Information provided automatically

The Registered Pension Schemes (Provision of Information) Regulations 2006 - SI 2006/567

…

Pension savings statement

A scheme administrator must provide a pension savings statement automatically if the individual has been an active member (or, in certain circumstances, a deferred member) for all or part of the pension input period ending in the tax year, and either:

• the individual’s pension input amounts under the scheme are more than the annual allowance amount in section 228 Finance Act 2004 (for example, £40,000 for tax year 2022 to 2023); meaning the tapered annual allowance is ignored • the scheme administrator believes the individual has flexibly accessed a money purchase arrangement and their money purchase pension input amounts under the scheme are more than £4,000.

Ordinarily, this information should be given to the individual by 6 October following the end of the relevant tax year. However, a different deadline applies in certain circumstances.

PTM167000 onwards gives more information about this requirement including:

• what information should be provided automatically and when • how information should be provided • what happens if the scheme administrator does not have the information they need to meet the requirement.

Also, the scheme administrator must inform HMRC that the pension savings statement has been issued to the individual.

14 CAS-60994-H2H2 Appendix two: Screenshot from NHS Scheme website 27 January 2020

15 CAS-60994-H2H2 Appendix three – NHS BSA Calculation of additional pension benefits

Hypothetical figures for the 2015 Scheme only;

Using pensionable pay of £86,593.44 (Dr S pensionable from 1 April 2018 to 28 February 2019) as an example.

Dr S has lost: £86,593.44 x 14 months out of the Scheme / 11 = £110,209.83 pensionable pay.

Immediate accrued pension on this amount is £110,209.83 / 54 = £2,040.92

However, this amount will receive a revaluation amount whilst he continues in this Scheme until he leaves/retires, and if he leaves before retirement Pensions Increase will be added.

If Dr S had opted out 4 months earlier (31 October 2018) then on a pro-rata basis his pensionable pay for the 4 months would have been £31,488.52 (£86,593.44 / 11 x 4).

This gives a basic pension of £583.12 (£31,488.52 / 54) in the 2015 Scheme only before any increases for revaluation etc. and does not include the increase in respect of his purchase of additional benefits.

Dr S has a current expected normal pension age of 68 in the 2015 Scheme and given a current life expectancy of age 83 for males, Dr S is likely to receive more pension than any loss for paying an Annual Allowance charge of £4,725.98 as he remained in the Scheme for longer

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