dont understand state pension

kamzee

Hi I Need To Make Sense Of State Pension

State Pension Why Is It Bieng Duducted From Our Personal Allowance:

Example :

Personal Allowance £5,435

State Pension Mins From Personla Allowance £3,000

Non Taxable Allowance Left Over After Pension Deductions £ 2,435


Now Are We Losing Out Where The Employer Will Now Tax Even More Of Year Slary Where Before The Duduction Of State Pension I Had £5,435 Of My Salary Which Was Safe From Tax Now Only £2,435 Is Safe From Tax

To Me It Makes No Sense If Your Getting A State Pension While Working Its Reducing You Personal Allowance And In The End The Employer Is Taxing More Of Your Salary Because Of The Deductions

Can Anyone Make Sense Of This And Is ?

What I Am Asking Is Why Have A State Pension If We Going To Get Taxed Anyone Sure It Will Work Out Better If We Had No State Pension While Working And Saved Paying Tax From Our Personal Allowance Does It Work Out Cheaper For Our Benifit Can Anyone Clear This Up Thanks

roddydogs

??????????? State pension is part of income,- so is taxed, if its your only income, it will be below you personal allowance, so you wont be taxed. over 65 you get more tax allowance, and dont pay NI.

liney

Firstly the employer isn't taking more of your salary; Inland Revenue is.

Secondly, Pensions are income and therefore taxable. That is the simple reason it is deducted from your allowance.

Should they be taxable, is a completely different discussion of course.

If deductions were not compulsorary and made from salary then many people simply would not save. The goverment would end up bailing them out when they retired, without the benefit of years of investing and compound interest it currently gains from your deductions at source. In turn you would end up paying more tax, as benefits would become more expensive to fund. Logically.

seven-day-weekend

For tax purposes, all taxable income is added together and if it is above your personal allowance you will pay appropriate tax.

State Pension is a Taxable Income, as are certain State Benefits and if you are working as well you will almost certainly have to pay more tax.

My husband receives Incapacity Benefit as well as his Teachers' Pension. IB, like State Pension, is classed as taxable income. His Pension and IB together put him over his personal allowance therefore he has to pay tax.

Once you are over 65 your Personal Allowance goes up anyway and you may not have to pay any tax.

Oldernotwiser

If you're continuing working after retirement you can postpone taking your state pension and receive a higher amount or a lump sum. If you take it and continue to work it becomes part of your overall income and is likely to be taxed.

kamzee

Thanks For All Your Reply You Are All Very Helpfull As You Have Helped Me Make Sense Of State Pension But I Just Want To Finally Know That If Im End Up Paying More Tax Because Of My State Pension Has Eaten Into My Personal Allowance So In The End Im I Paying Even More Tax Of My Thats Out Wieghing My State Pension Where As Before I Saved Money As Less Tax Was Comming Off My Salary Because My Personal Allowance Made Sure Of That I Paid Less Tax So Do I Still Gain Is What Im Trying To Work Out Thanks In Advance Sorry Just Want To Make Sense Of This

seven-day-weekend

kamzee wrote: »

Thanks For All Your Reply You Are All Very Helpfull As You Have Helped Me Make Sense Of State Pension But I Just Want To Finally Know That If Im End Up Paying More Tax Because Of My State Pension Has Eaten Into My Personal Allowance So In The End Im I Paying Even More Tax Of My Thats Out Wieghing My State Pension Where As Before I Saved Money As Less Tax Was Comming Off My Salary Because My Personal Allowance Made Sure Of That I Paid Less Tax So Do I Still Gain Is What Im Trying To Work Out Thanks In Advance Sorry Just Want To Make Sense Of This

kamzee I don't really understand your post.

Are you asking if you should be better off with working and claiming pension,even though you are paying more tax, than by not claiming your pension at all and paying less tax?

I think the answer is yes, you should be better off with your pension and your wages together even though you will pay more tax on your wages.

If this is not what you were asking, can you make it a little clearer please?

kamzee

thankyou very much seven day weekend thats what i was trying to write down from my mind thats exactly what i was asking thankyu very much for helping me put in into words lol

but are we really better off when we could be saving more on getting cut less tax before the pension had eaten into our allowance

does it really work out for us better off this way if it does i cant work out why i still think it would be cheaper the other way maybe i just cant work it out logically and i am seeing it from a different point of view lol are we still gaining??? if we are fair enough thats concluded my answers to my question and thanks to everyone and thanks to you aswell seven day your a star

seven-day-weekend

Yes, you are better off because although you will have reduced wages, you still have your pension as well, which will be considerably more than the extra tax you have to pay.

It IS confusing, when I saw my husband's tax code when they deducted his Incapacity Benefit, it looked as though they were taking all the IB in tax, but they weren't . it was just a way of working out the tax code and in fact he only has to pay £10 more a month tax than if he didn't have the IB.

The tax office explained it to me and I understood at the time but can't explain it now :rotfl::rotfl:

Hope this helps.

kamzee

thanks seven day i guess we do still end up getting more even if at first it seems like we paying more tax than the amount of state pension i guess logically we still getting more than we paying out tax many thanks for helping thank you and your example of your husband helped me out a lot :beer:

lilac_lady

If you take your state pension and save it while you're still working it will be a nice nest egg for your retirement. You'd need to be strict wth yourself though! On the other hand it could pay for things you can't afford at the moment so it's your choice what you do with it. I'd take the state pension anyhow. A bird in the hand etc etc.