How. Much should the tax be?

lee8040

My step mother in law has just got her pension after fighting who should be paying it and won. She got a £61000 lump sum and something like £175 a month or something. The thing is on the 61k they have taxed her 24k does this sound about right or sound way to much?

grey_gym_sock

what kind of pension scheme is this?

many schemes have tax-free lump sums. that sounds like 40% tax.

is the lump sum a normal part of the pension, or something else e.g. compensation for mis-selling?

lee8040

I think it's part of the pension not compo

mgdavid

is she still working, in another job maybe? need a lot more detail before being able to assess th full situation

lee8040

No basically she retired early and had a pension with the council she retired early due to medical reasons but had a full pension. The council changed owners and was fighting which one should pay her.she won and has just been awarded the above amounts

jem16

lee8040 wrote: »

The council changed owners and was fighting which one should pay her.she won and has just been awarded the above amounts

How long has she been fighting over this?

On a normal £175pm payment, you would expect a lump sum of 3 times the annual payment so £2,100 x 3 = £6300.

The lump sum of 61,000 is far too high to be just a normal tax-free lump sum.

You really need to give us some more detail.

Vortigern

jem16 wrote: »

The lump sum of 61,000 is far too high to be just a normal tax-free lump sum.

Could it be a Redundancy/Severance Payment? (of which 30K would be tax-free)

jem16

Vortigern wrote: »

Could it be a Redundancy/Severance Payment? (of which 30K would be tax-free)

Quite possible.

hyubh

lee8040 wrote: »

No basically she retired early and had a pension with the council she retired early due to medical reasons but had a full pension. The council changed owners and was fighting which one should pay her.she won and has just been awarded the above amounts

That can't quite be right. Talking about a 'council' implies the LGPS, in which case it is the pension fund that pays the pension, not the employer (or 'owner' as you put it). According to the scheme regulations, ill health pensions are something the employer must decide upon, with medical evidence, however there is no automatic 'strain charge' imposed on the employer if they agree - the rate of ill health pensions is just something the actuary will look at in next valuation of the pension fund. As such, there can be no debate about who's 'paying' for a particular ill health pension - it's the pension fund, full stop.

That said, as the others have suggested, it seems you're talking more about a redudancy or other non-pension payout than a pension lump sum.

Drp8713

If its an ill health tier 1 with a service enhancement to 65 the OH doctor needs to decide if the member is exempt from an annual allowance check. People who are awarded tier 1 are usually not tested but a massive enhancement if your young could cause a tax charge.

If its 40% it also could be an HMRC unauthorised payment charge with the scheme paying the other 15% but without more info we cant see why