NHS and LGPS annual allowance: the statement and the input amount

The NHS Pension Scheme and the Local Government Pension Scheme are defined benefit schemes, so the annual allowance is not measured against what the member pays in. It is measured against the growth in the benefits they have built up over the year, the pension input amount. This guide covers how that growth is valued, how it reaches the member's pension savings statement, where the NHS sections and the LGPS differ on the automatic lump sum, and one worked year. It is the starting point; the detail of the CPI step and of the statement's contents is in the guides it links to.

What the pension savings statement tells you

Every registered pension scheme must send a pension savings statement by 6 October after the end of the tax year where a member's pension input amounts under that scheme are more than the standard annual allowance, £60,000 for 2026/27 (PTM167100). This covers active members, and deferred members unless the deferred member carve-out applies. NHS Pensions says it will send one if growth in a member's 1995/2008 Scheme or 2015 Scheme benefits is more than the standard annual allowance: by 6 October where it has the membership information from the employer or a third party by 6 July, and otherwise within three months of receiving it. A member can also ask for one on demand. The trigger ignores the tapered annual allowance, so a tapered member may need to ask for a statement they were not sent.

Each statement gives that scheme's pension input amount for the year and the three years before it, beside each year's annual allowance. What it shows and how the four years feed carry forward is set out in reading a pension savings statement for carry forward. The rest of this guide is about where the defined benefit figure comes from.

How the scheme values the growth

HMRC sets out the method at PTM053301, under FA 2004 ss.234–235. The opening value is the annual pension built up immediately before the pension input period, multiplied by 16, plus any separate lump sum built up by then. The closing value is the same calculation at the end of the period. The multiplier comes from PTM053301 Step 2:

The lump sum that counts is a separate one, paid automatically on top of the pension. It is already a capital amount, so it is added at face value, not multiplied by 16. A lump sum the member would take by giving up pension is not added at all, because it is reflected in the pension figure (FA 2004 s.234 counts only a lump sum payable “otherwise than by commutation of pension”).

Before the opening value is taken away from the closing value, it is increased by the 12-month rise in CPI to the September before the start of the tax year (PTM053301 Step 4; FA 2004 s.235(3)). Growth that only keeps pace with CPI therefore produces no pension input amount; growth above it does. For 2026/27 the rate is 3.8%. Why the step matters and how HMRC's own example rounds it are worked through in DB pension input amounts: the CPI step.

The automatic lump sum: NHS sections and the LGPS

Whether there is a separate automatic lump sum to add depends on the section and on when the membership was built up. NHS Pensions describes the position for each part of the scheme this way:

For a 2008 Section member who moved under the Choice exercise, NHS Pensions says the mandatory lump sum is taken in exchange for pension, so check with the scheme how its statement treats it before adding it at face value.

In all three a member can give up pension for a lump sum, which, as above, does not add to the pension input amount. For the LGPS in England and Wales, membership built up before 1 April 2008 carries an automatic lump sum of three times the pension from that membership; membership from 1 April 2008 carries none. The LGPS in Scotland and in Northern Ireland have their own regulations and member guidance; in both, the automatic lump sum is for membership built up before 1 April 2009. Leaving the lump sum out, or multiplying it by 16, can change the input amount for any member with pre-2008 LGPS benefits in England and Wales (pre-2009 in Scotland and Northern Ireland) or NHS 1995 Section benefits.

One further point for NHS members: under the public service pensions remedy (McCloud), eligible members' pensionable service from 1 April 2015 to 31 March 2022 was moved from the 2015 Scheme back to the 1995/2008 Scheme. Where the criteria NHS Pensions sets out apply, it sends a remediable pension savings statement with revised pension input amounts for 2015/16 to 2021/22, so earlier statements for those years may have been superseded.

A worked year

Every result below is computed by ParaplanAI's DB pension input amount engine, the one behind the calculator, on the 2026/27 tax-year figures. A member of a final salary section with an automatic lump sum of three times the pension, as in the NHS 1995 Section, has a pay rise. Their pension built up rises from £30,000 at the start of the pension input period to £34,500 at the end, and the lump sum from £90,000 to £103,500.

The pension input amount of £63,840 is more than the £60,000 standard annual allowance, so the scheme must send a pension savings statement for 2026/27.

Now the same pension with no automatic lump sum, the position of a 2015 Scheme member or of a 2008 Section member who did not move under the Choice exercise:

Here the pension input amount is £53,760, which is not more than £60,000, so this scheme would not have to send a statement automatically. The automatic lump sum grew with the pension, and that growth counts at face value, which is enough to take the first member over the statement trigger.

From the statement to the charge

A statement is not a charge. Whether the member owes an annual allowance charge depends on their pension input amounts in every scheme added together, unused allowance carried forward from the three previous years, and whether the tapered annual allowance applies. The rules for the earlier years are in carry forward of unused annual allowance. Where a charge does arise, both NHS Pensions and the LGPS offer scheme pays; the conditions and deadlines are in scheme pays: mandatory, voluntary and the deadlines.

To check the defined benefit figure on a statement, the inputs are the four in the working above: the pension and any automatic lump sum built up at the start and at the end of the pension input period. A statement's total can also include other inputs under the same scheme, such as additional voluntary contributions in the LGPS, which are added on top. Enter them in the DB pension input amount calculator, which applies the CPI for the year you choose, and take the result into the annual allowance calculator for the charge. For planning and illustration only; this guide describes the rules and is not tax or financial advice.

FA 2004 s.234 · FA 2004 s.235 · PTM053301 (valuing defined benefits) · PTM167100 (pension savings statements)