In the past year, 148 NHS pension members overpaid more than £600,000 in tax. The reason? A combination of flawed legislation and administrative delays around something most pensioner members have never heard of: the Transitional Tax-Free Amount Certificate (TTFAC).
Unless action is taken, another 14,000 consultants and GPs could face the same fate in the coming years.
What’s going on?
In April 2024, the Lifetime Allowance (LTA) was abolished. Whilst this change was welcome, it hasn’t opened the door to unlimited tax-free pension cash. Instead, a cap still applies, and if you didn’t take the maximum tax-free amount before, you may get another chance with any additional pensions that you haven’t yet taken.
That’s where TTFACs come in. They allow pension members who’ve already retired using 100 percent of the LTA to claim additional tax free cash when taking further pension benefits, but only under very specific conditions.
The Problem in Practice
Let’s take an example of a consultant who retired before 6th April 2024:
- A 1995 section member retires with a £50,000 annual pension and a £150,000 lump sum.
- Their LTA usage totals £1.15 million, more than 100% of their allowance.
- But they only took £150,000 tax-free, far below the new £268,275 limit.
This member could theoretically take more tax-free cash from any personal pensions, or from any 2015 Scheme benefits they may have accrued, but only if they apply for a TTFAC at their first Relevant Benefit Crystallisation Event (RBCE) after 6 April 2024.
Miss that window and you could lose the opportunity forever.
What’s Blocking Applications?
To apply for a TTFAC, members must prove how much tax-free cash they previously took. This sounds simple, but if you are subject to the McCloud remedy, then you could retrospectively change your lump sum benefits, and so you must first have had your McCloud choice. That choice comes from the Remediable Service Statement (RSS), which is now significantly delayed, in some cases until December 2026.
Without an RSS, there’s no confirmation of the lump sum that you’ve taken and without that, you can’t apply for a TTFAC. Meanwhile, your RBCE clock is ticking.
It gets worse: some members are unknowingly triggering BCEs before receiving their RSS, meaning they’re locked out before they even know they needed to act.
Who’s Affected?
This issue affects a specific, but substantial group, who meet all of the following criteria:
- NHS pension members who retired before 6 April 2024
- Those who used more than 100% of their LTA, but took less than £268,275 tax-free cash (or 25% of any protected LTA)
- Has other pension benefits that they have not yet taken, such as personal pensions, or additional 2015 service benefits
What Can Be Done?
Our team at Medifintech, an NHS pension specialist company within Quilter, identified this issue early and worked closely with NHSBSA to protect clients. In fact, the only three known members who successfully applied for a TTFAC and avoided additional tax on additional NHS pension benefits were Medifintech clients.
We developed a fast-track process with NHSBSA to help eligible members apply, but this still only helps a lucky few.
That’s why we’ve now written to the government, urging them to:
- Allow TTFAC applications even after a member’s first RBCE
- Permit the use of TTFACs to reclaim tax already paid
- Protect members affected by RSS delays and McCloud adjustments
What Should You Do?
If you’re an NHS pension member who:
- Retired before April 2024
- Used 100% of the Lifetime Allowance, but took less than the full tax-free amount
- Looking to take other pension pots or 2015 benefits
- Have not received your RSS
You can apply for a Fast Track RSS, by emailing fast-tracksupport@nhsbsa.nhs.uk
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