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Remedy

Scheme Pays Guide

How Scheme Pays works in the public-sector pension schemes: when your scheme must pay, the 31 July deadline, the 6 July 2027 McCloud remedy deadline, voluntary Scheme Pays, and what happens to your pension.

Last updated: 2026-09-30
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Watch the explainer · 1 min 29 s

Scheme Pays: pay now, or from your pension?

1 min 29 s · Captions on · Official sources checked 30 September 2026

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Scheme Pays Tools & Guides

Annual Allowance Guide

Understand when charges arise

Tax Planning Guide

Strategic approach to pension taxes

Mandatory vs Voluntary Scheme Pays

Key differences between the two options

Mandatory Scheme Pays

  • ✓Growth in the scheme is above the standard Annual Allowance and the charge is over £2,000
  • ✓Scheme must accept a valid election
  • ✓Deadline: 31 July in the year after the tax year ends (6 July 2027 for the amount the McCloud remedy adds)
  • ✓Cannot be revoked; can be amended for up to 6 years
  • ✓Joint liability with scheme

Voluntary Scheme Pays

  • !Non-mandatory scenarios (including tapered allowance cases)
  • !Scheme can refuse election
  • !NHS England and Wales: same SPE2 and 31 July deadline; other schemes set their own process
  • !The tax stays your liability

What is Scheme Pays?

Scheme Pays lets you ask your pension scheme to pay some or all of your Annual Allowance charge to HMRC. In return, your pension benefits are reduced. Key points:
•The charge is still your own tax liability, and you still report it on your Self Assessment return
•It comes in two forms: Mandatory, which the scheme must accept when the legal conditions are met, and Voluntary, which is at the scheme's discretion
•You can ask the scheme to pay only part of the charge and pay the rest to HMRC yourself
•It only applies to a tax-registered scheme. Judges' service from 1 April 2022 is in the Judicial Pension Scheme 2022, which is not registered for tax and does not count towards the Annual Allowance, so it has no Scheme Pays
This can help manage a charge without finding the cash now, at the cost of a smaller pension later.
Source: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm056410

Mandatory Scheme Pays

Your scheme must pay when both of these are true:
Eligibility Criteria:
•Your Annual Allowance charge for the year is more than £2,000
•Your pension growth in that one scheme is above the standard Annual Allowance (£60,000). The test uses the standard allowance, not your tapered or available allowance
What it covers:
•At most, the charge on the growth in that scheme above the standard allowance. If your allowance is tapered, the part of the charge caused by the taper falls outside mandatory Scheme Pays
•Once the scheme receives a valid notice, you and the scheme are jointly and severally liable for the amount you asked it to pay
Deadline:
•31 July in the year after the tax year ends. For 2025/26, which ends in April 2026, that is 31 July 2027
•If you are about to take all your benefits, you must give notice before that happens
Changing an election:
•A notice cannot be revoked, but it can be amended
•The scheme must receive an amendment by the 31 July after the end of 6 years from the end of the tax year
Which form:
•NHS Pension Scheme in England and Wales: the SPE2 form, sent to NHS Pensions (NHSBSA). NHS Pensions counts the date it receives the election
•NHS Scotland (SPPA), NHS Northern Ireland (HSC Pension Service) and every other scheme: your administrator's own election form
Source: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm056430

Voluntary Scheme Pays

If the mandatory conditions are not met, or you miss the deadline, a scheme may choose to pay voluntarily. That can cover:
•Growth in the scheme below the standard allowance, where a tapered allowance still leaves a charge
•The part of a charge that comes from the taper
•A charge of £2,000 or less
•Growth spread across more than one scheme, with no single scheme over the standard allowance
Key Differences from Mandatory Scheme Pays:
•It is not a right. Teachers' Pensions, for example, says it is purely at the Scheme Manager's discretion
•The scheme is not jointly liable: the tax stays your liability
•NHS Pension Scheme in England and Wales: NHS Pensions uses the same SPE2 form and the same 31 July deadline. You remain responsible for the charge and any interest if the payment reaches HMRC after 31 January
•NHS Pensions considers elections submitted after retirement under voluntary Scheme Pays only
Source: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm056410

McCloud remedy: a later deadline

Where the McCloud remedy increases your Annual Allowance charge, mandatory Scheme Pays covers the amount the remedy adds to that charge, even below the usual thresholds. That amount has this deadline. The rest of the year's charge keeps the ordinary rules:
•SI 2026/673, in force from 14 July 2026, replaces the 31 July date with 6 July 2027 for these notices
•HMRC confirms that active and deferred members affected by the remedy (those who had not started taking benefits before 1 October 2023) now have until 6 July 2027, the same as pensioner members
•It also applies to 2022/23 charges in a Chapter 1 scheme where you had remediable service in an earlier year
•If you miss 6 July 2027, the election becomes a voluntary Scheme Pays request
•You can make the election through HMRC's "Calculate your public service pension adjustment" service, and HMRC passes it to your scheme
Some scheme pages have not caught up: the NHS Pensions remedy page still shows 6 July 2025. The law now says 6 July 2027.
Source: https://www.gov.uk/government/publications/public-service-pensions-remedy-newsletter-july-2026/newsletter-on-the-public-service-pensions-remedy-june-2026

Key Deadlines

Critical dates for Scheme Pays elections:
Mandatory Scheme Pays:
•31 July in the year after the tax year ends. Example: 2025/26 ends in April 2026, so the deadline is 31 July 2027
•You cannot give notice until the tax year of the charge has ended
•Earlier, if you are about to take all your benefits: notice must be given before then
•Later, if a late or revised Pension Savings Statement newly makes Scheme Pays available: you then have until the earlier of 3 months from that statement or 6 years from the end of the tax year
The amount the McCloud remedy adds to a charge:
•6 July 2027. The rest of that year's charge keeps the ordinary 31 July deadline
Voluntary Scheme Pays:
•NHS Pensions uses the same 31 July deadline for voluntary and mandatory requests. Other schemes set their own process, so ask your administrator
•Even where accepted, interest can remain yours if HMRC is paid after 31 January
Source: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm056430

Impact on Benefits

By law, the scheme must reduce your benefits on a just and reasonable basis, having regard to normal actuarial practice. How that works differs by scheme:
NHS Pension Scheme (England and Wales):
•NHS Pensions compares it to a loan you repay with interest when you retire or transfer out
•1995 Section: both your pension and your retirement lump sum are reduced. 2008 Section and 2015 Scheme: only your pension is reduced
•The reduction is calculated using factors provided by the Scheme Actuary, and the exact figure is set at retirement. Earlier estimates are indicative
•Benefits payable to your spouse or dependants on your death are not reduced
Teachers' Pension Scheme:
•The debit is increased in line with HM Treasury Pension Increase factors, not the NHS interest basis
•Teachers' Pensions says the debit will not be applied to benefits payable on a member's death
Armed Forces Pension Scheme:
•The MOD says Scheme Pays permanently reduces benefits, but does not affect benefits payable to your dependants after your death
Considerations:
•Compare the reduction with paying the charge yourself
•If you die before the scheme has adjusted your benefits, the scheme may be discharged and your estate owes the charge
Source: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm056460

Scheme Pays Decision Framework

1. Confirm the charge

Use your Pension Savings Statement and carry-forward position before assuming a charge exists. A high pension input amount (PIA) does not always mean tax is due.

2. Check the route

Mandatory Scheme Pays is a legal right once its conditions are met. Tapered allowances, growth spread across schemes, and charges of £2,000 or less fall under voluntary rules, which are at the scheme's discretion. Judges' service from 1 April 2022 has no Annual Allowance, so no Scheme Pays.

3. Compare the cost

Paying yourself keeps your pension whole but needs cash now. Scheme Pays avoids the cash cost through a permanent reduction to your pension, which grows until you retire (NHS Pensions adds interest; Teachers' Pensions uses Pension Increase factors).

Documents to prepare before deciding

Pension Savings Statement showing the PIA, scheme sections, and tax year. If you have McCloud-affected years, check whether revised figures have been issued.
Carry-forward figures for the previous three years. A year counts only if you were a member of a registered pension scheme at some point in it; a member with no growth that year carries forward the full allowance.
Your marginal tax rate and Self Assessment position, including whether the charge is already reported or still provisional.
Previous Scheme Pays elections, because existing scheme-pays debts can affect the long-term pension reduction and retirement planning.

Critical Deadlines

Scheme Pays deadlines are strict. Miss the mandatory deadline and any payment by the scheme becomes voluntary, at its discretion. NHS Pensions counts the date it receives your election, and tells members not to wait for a Pension Savings Statement but to estimate and elect in time. Voluntary payments can leave you responsible for HMRC interest if paid after the Self Assessment deadline.

Related guides

These related guides cover the next questions that usually come up after this topic.

Annual Allowance

Confirm the charge before deciding how to pay it.

Read next

Carry Forward

Check whether unused allowance removes the charge.

Read next

Self Assessment

Report the charge and Scheme Pays election correctly.

Read next

Required Actions

1

Assess eligibility

Check if your circumstances qualify for Mandatory or Voluntary Scheme Pays

2

Compare options

Calculate the long-term impact of scheme pays vs personal payment

3

Submit election

Complete forms and submit before the relevant deadline

4

Monitor impact

Track how the scheme pays affects your future pension benefits