taking pension and continuing to work

jd1957

I resigned from the civil service some 5 years ago and am now working full time for another employer. I am thinking of taking my civil service pension and lump sum in July 2012 (age 55) but I intend to carry on in my current job.
What are the tax implications? and are there options to reduce any additional tax burdon?
thanks
John

Bigmoney2

The additional income(pension) could push you into a higher tax bracket.
Pension will be reduced by going early, why loose pension if you don't need extra income (assuming that is the case).

jamesd

You could pay income into another pension scheme. That would get you tax relief and you could take a 25% tax free lump sum from that scheme. The remaining 75% would have to stay in it to provide an income unless you already have secured pension income of £20,000 or more per year, or until you do have that much. If you reach that secured income level then you could take out as much of the 75% as you wish at any time using flexible drawdown.

You could use Venture Capital Trust, VCT, investing to get the 30% tax relief, capped at the amount of tax you pay each year. These are at a minimum medium investment risk level, many are medium-high or higher. You need to keep the money invested for five years or you have to repay the tax refund.

You could consider taking out a mortgage and working out whether the interest on say an offset mortgage is more or less expensive than the loss of income from taking the pension earlier. There's a good chance that the mortgage will be a better deal than taking the pension early but it does depend on the specific numbers.

atush

Personally, if you don't need it, don't take it.

You will pay tax on it as you are working elsewhere, and your pension will be lower as a result. It will be higher each year you can defer taking it so do not take it unless you really really need to.

mgdavid

atush wrote: »

Personally, if you don't need it, don't take it.

You will pay tax on it as you are working elsewhere, and your pension will be lower as a result. It will be higher each year you can defer taking it so do not take it unless you really really need to.

not necessarily at all !
Many schemes - public and private sector - have provision to retire earlier than 65 with no loss or reduction. OP needs to understand the scheme rules relative to his/her age... too little info to make a judgement on here, but suffice to say if you can take the pension early with little or no reduction, then it's FREE MONEY - what's not to like?

atush

Not 'many' schemes, I'd say few. If you retire earlier you most often get a reduction in pension payable and a lower lump sum if applicable as to do anything else tends to disadvantage those retiring at the normal pension age. and any income will most likely, if you are still working, be taxed at a higher rate than if you wait until you aren't working.

I do agree the OP needs to research this thoroughly beforehand to find out about his specific scheme.

iwilldoitthistime

the civil service classic scheme reduces your pension by 5% for every year you take it before NPA (60)