Actuarily Reduced Local Government Pension - Tax Question?

seven-day-weekend · 19 November 2009 at 6:51PM

I wonder if you kind people can do some number-crunching for me? On February 1st 2010 I start drawing my State Pension as I will be 60. It will be £102 a week.

I also have the chance to take my deferred Local Government Pension. However, I will lose quite a bit of it for taking it early and it will also put me into a position of paying tax.

I do not have absolutely up-to-date figures yet, but I calculate it will pay me about £36 a week if I take it at 60.

My tax code is just the bog standard single person's which I believe is 647 for the 2009-10 Tax Year.

I don't desperately need the money at the moment and of course can draw the pension any time between 60 and 65.

Can anyone work out using these figures how much tax I will have to pay if I take the pension? It might not be worth taking it early and losing a percentage of it if it is going to be further reduced by tax.

I am now UK resident.

Thanks in advance

CLAPTON · 19 November 2009 at 7:11PM

if you are saying that your weekly income will be
102 plus 36 and not other then you will pay tax of 140 per annum or £2.70 per week.

seven-day-weekend · 19 November 2009 at 7:24PM

Thankyou Clapton. There may be a tiny bit more income but I just wanted it calculated on that amount in case there isn't!

Well I suppose £2.70 a week isn't bad, although of course I will then have to start paying tax on my bank interest as well.

I think I probably will leave the Pension where it is. It is index linked and the longer I leave it, the less I will have deducted from it.

The earliest I can take it without actuarial reduction is August 2014.

mcguireuk · 19 November 2009 at 7:40PM

If you leave this pension until your reach 65 then your personal allowance will have increased and therefore you will receive more of it tax free. Also make sure you inform HMRC as soon as you start to receive your state pension. By doing this they can make sure the state pension figure in your code will be up to date and correct and will prevent any underpayment at the end of the year....

seven-day-weekend · 19 November 2009 at 9:47PM

Thank you Mcguire I will do that.

Unlike my State Pension, which I will NOT defer, if I snuff it before actually drawing my LG Pension, my husband and son still get a payout. So I think, unless we desperately need the money, I'll wait untill I can take it unreduced with no tax.

I did know about the increase in tax allowance at 65 - thanks anyway!

Thanks all for your help.

seven-day-weekend · 20 November 2009 at 12:05AM

The retirement age for Local Government is 65. Always has been afaik.

Andy_L · 20 November 2009 at 10:07AM

It always was 65 but the "rule of 85" meant that anyone with 25+ years service could go at 60 without actuarial reduction.
That was done away with for future service a few years ago

The NRA in the CS is also 65 for anyone who joined recently enough to be in the new pension scheme

seven-day-weekend · 20 November 2009 at 6:58PM

Yes I did know about the Rule of 85 - it's why I can draw my unreduced pension in August 2014 instead of January 2015 which is when I am actually 65.

My colleague who is the same age as me has reached the Rule of 85 already, so he can draw his unreduced pension now at 60.

Actuarily Reduced Local Government Pension - Tax Question?

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