Trivial pension payment

srcandas

My wife has a SIPP. When she turns 60 she is likely to be a non earner claiming no benefits.

The pot is going to be say £16000 - with no other pension pots or payments of any type).

As I understand it she may be able to take 25% tax free and the rest taxed as normal income (a one off trivial payment).

As she will not have used her personal allowance much of the deducted tax will be reclaimable via a P53.

Question: In the year she does this will she be credited with any NI payment? Can she make this year a contributor towards her state pension based on what might appear as a £12000 salary?

As she does not have a full NI record every extra year will help with the state pension calculation- especially if it is one that pushes her over the minimum required number

I know rules can and probably will change but just trying to get an idea as of today

mania112

NI Conts and Income Tax are separate things.

If you're employed you'll see both coming off your payslip.

Income from a pension is subject to income tax only.

NI Conts are not factored into it.

See here about topping up National Insurance: http://www.hmrc.gov.uk/ni/volcontr/whentop-up.htm

srcandas

mania112 wrote: »

NI Conts and Income Tax are separate things.

If you're employed you'll see both coming off your payslip.

Mania tx for responding. The HMRC say a P45 will be issued by the pot holder. That the dosh will be treated as income.

I guess my question is "Is it pension income or is it a special payment subject to tax"?

:beer:

McKneff

If it is only £16K and she has no other pension pots,she should be able to take the whole pot as a lump sum, not just 25% of it.

Get her to ask for a pension forecast.

If her forecast is less than 60% of the full state pension then she should be able to claim the 60% from your contributions.

Do you know how many years contributions she has. The requirement is 35.

If she fills in an R85 if she is not taking her personal tax allowance she will not pay tax on the interest on savings. This saves paying it and claimiing it back.

jem16

McKneff wrote: »

If it is only £16K and she has no other pension pots,she should be able to take the whole pot as a lump sum, not just 25% of it.

Yes but as the OP says, only 25% of it is tax free. The rest is taxed as income.

xylophone

http://www.pensionsadvisoryservice.org.uk/workplace-pension-schemes/final-salary-schemes/cashing-in-pensions-(triviality)

The requirement is 35.

No, not under current rules. http://www.rights4seniors.net/content/qualifying-years

If her forecast is less than 60% of the full state pension then she should be able to claim the 60% from your contributions.

Yes under current rules


But http://www.bbc.co.uk/news/business-20989050
http://www.dwp.gov.uk/docs/single-tier-pension.pdf

srcandas

Many tx folks but if anyone can help with the question of using a trivial pension payment as a qualifying state pension year it would be much appreciated.

To explain my partner is spanish with 28 years contributions in Spain. She has four years contributions in the UK and could add a further 10 years worth (although once I close my business in 4 years time that could be difficult thus the idea of a year based on a SIPP trivial would be very useful).

HMRC forecast a payment of £50.14 a week if she gets to 14 years. What she will get and when from a bankrupt Spain who can predict

atush

Basically, pension income (which this counts as ) does not attract NI so will not count as a qualifying year.

If she needs that year (or others in future) she can pay voluntary contributions.

It was my understanding, that under EU rules she could transfer her Spanish entitlement to the UK system but i don't know how. But it has been covered here before so you could try a search or start a new Thread with that in the title?

Linton

srcandas wrote: »

Many tx folks but if anyone can help with the question of using a trivial pension payment as a qualifying state pension year it would be much appreciated.

To explain my partner is spanish with 28 years contributions in Spain. She has four years contributions in the UK and could add a further 10 years worth (although once I close my business in 4 years time that could be difficult thus the idea of a year based on a SIPP trivial would be very useful).

HMRC forecast a payment of £50.14 a week if she gets to 14 years. What she will get and when from a bankrupt Spain who can predict

NI only applies to earned income. A pension repayment isnt earned. However she can always make a voluntary NI contribution independent of income. See here.

srcandas

atush wrote: »

Basically, pension income (which this counts as ) does not attract NI so will not count as a qualifying year.

Yes I think both you and Linton are correct. But would have hated to miss an opportunity.

atush wrote: »

If she needs that year (or others in future) she can pay voluntary contributions.

Yes but when to do it and the impact of this is difficult to calculate under the circumstances. But yes it is an option.

atush wrote: »

It was my understanding, that under EU rules she could transfer her Spanish entitlement to the UK system but i don't know how. But it has been covered here before so you could try a search or start a new Thread with that in the title?

Sadly the ability to transfer is often quoted but all practical examples I have found, people receiving multiple European pensions, says otherwise. Of course in ten years who knows especially if the UK is outside the EU

I see the trivial limit (currently £18000) will be set independent of the life time allowance and other factors from now on. I wonder if this means it will rise each year or if the government could even abolish it.

What I'd give for stability :rotfl:

xylophone

http://europa.eu/youreurope/citizens/work/retire/state-pension-claims-and-calculation/index_en.htm