state pension lump sum

mrcharrington

Hi

My mother has just turned 65 and still works earning just over 19k pa. I was not aware but her state pension has been accruing since she was 60 and can be taken as a lump sum. I didnt know you could do this.

Anyway, with this years salary and her lump sum pension she will have acquired over £40k. Will she have to pay 40% tax on everything over the tax band threshold even though its accrued pension.



Thanks

[Deleted User]

Hi,

had a wee search and found this.

From link:

For example, if the highest rate of tax applicable to your other income is 20 per cent, your lump sum will be taxed at 20 per cent. This is instead of being counted with your other income which might take you into the 40 per cent tax band.

mrcharrington

Thanks very much for that.

I noticed that it only mentions defering state pension for 12 months. I hope my mum is right and gets it all backdated!

allen35

There is no time limits on length of deferred state pension and the lump sum will be paid with interest at 2% above bank base rate (not much i'm afraid) and 1% pre 2005

Wish your mum a happy retirement

[Deleted User]

Hi,

mrcharrington wrote: »

Thanks very much for that.

I noticed that it only mentions deferring state pension for 12 months. I hope my mum is right and gets it all backdated!

it's a minimum 12 months to get a lump sum.

If you choose to put off claiming your State Pension for at least 12 consecutive months you can get a one-off lump sum payment instead.

millie

If your mother delays taking her pension until she eventually gives up work, and her income is below the tax threshold in the year she claims the lump sum she would not pay any tax on it at all. She can claim the weekly pension and delay taking the lump until the following tax year if it means she would be under the tax threshold in the following year. That is what I did and I paid no tax on my 3 years of deferred pension.

mrcharrington

Thanks Allen I will

Thanks for the info. Your option sounds good Millie. Mums is 5 years so not sure how much exactly but gross in the region of 25k.

Thanks for the help