Quilter today (January 13) announced that its voluntary scheme pays feature will be part of Old Mutual Wealth, the firm’s adviser platform, and will apply to its personal pension known as the Collective Retirement Account.
Scheme pays allows savers to settle annual allowance tax charges of more than £2,000 through the pension fund without needing to find funds upfront.
Quilter decided to add this function to its platform due to the ongoing issues that public sector workers, in particular doctors, are facing with the tapered annual allowance.
Introduced in 2016, the tapered annual allowance gradually reduces the allowance for those on high incomes, meaning they are more likely to suffer an annual tax charge on contributions and a lifetime allowance tax charge on their benefits.
The taper means that for every £2 of adjusted income above £150,000 a year, £1 of annual allowance will be lost.
These tax rules have forced senior clinicians and other high earning public sector workers to either leave their pension scheme, cut down on their working hours or retire early to avoid punitive tax bills.
Through scheme pays Quilter clients can use their personal pensions to pay the tax charge if they have exceeded the annual allowance limit, which is currently £40,000.
The platform is available to clients of all advisers, not just those involved with Quilter’s national advice business.
Clients will have to fill in a form on the platform to select the scheme pays option when paying the tax charge.
The Collective Retirement Account will then pay HM Revenue & Customs as soon as the request has been received, minimising the risk of any late payment penalties, according to Quilter.
According to a freedom of information request from Quilter last year (May 2019), 12,655 members of the NHS pension scheme exceeded their annual allowance in the 2018-19 tax year and of these 3,869 used the scheme pays facility to settle their debts.
Ian Browne, pensions expert at Quilter, said: “The issue of annual allowance breaches has truly reached the mainstream given all the problems facing doctors, judges, members of the armed forces and other public sector employees.
“As such providers need to come to the fore with innovative solutions that makes it easier to pay for a tax charge many are unaware they have triggered.