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2026 Annual Allowance/Scheme Pays
Annual Allowance (AA) is the maximum amount of tax-free growth an individual’s pension savings can grow by in any one year. If individuals exceed this limit they will require to pay an AA tax charge to HMRC, however, any unused allowance from previous 3 years can be used to offset this increase. AA is calculated by the growth in benefits from one year to the next taking into account inflation (which is measured using Consumer Price Index (CPI) method). The 2026/27 pension allowance is set as £60,000.
For majority of NIFRS members AA will not affect them. However, any of the following could impact on the growth of your pension savings:
- Being a high earner;
- Increase in pay, possibly down to substantive promotion;
- Purchasing additional pension, e.g. transfer.
HSC will be contacting members via email with statements attached who has an AA breach by 06 October 2026, these will also be available on your HSC Engage Portal.
If you have a breach but have enough unused allowance from the previous 3 years across all your pension schemes you will have no further action to take.
Important Deadlines
If you do have a breach there are important deadlines that you need to adhere to as follows:
If you breach the annual allowance and do not have enough unused allowance to carry forward you need to inform HMRC and this is done via self-assessment which needs submitted before 31 January 2027. Members should take action as early as possible in advance of this date as HMRC are extremely busy at this time of the year and if you have never registered for self-assessment before this can take time. You may elect for the scheme to pay some or all of the charge on your behalf in certain circumstances and a reduction will be applied to your pension entitlement as a result.
If your charge falls into the Mandatory Scheme Pays category you must elect for the Scheme to pay your charge by 31 July 2027. If your charge falls in the Voluntary Scheme Pays category you must elect for the Scheme to pay your charge by 31 December 2026 as the Charge needs paid to HMRC by 31 January 2027. If the charge is not paid at all or not paid on time HMRC will apply interest which you will be liable for. Members must ensure their notifications are received by HSC Pension Service by the cut off date to avoid penalties.
More information can be found under HSC Pension Service website link Annual Allowance (NIFRS) | HSC Pension Service
NIFRS or HSC Pension Service cannot provide tax advice and you should consider seeking independent financial advice if you have incurred a charge.