pension tax implications?

Sterlingtimes

Oh, Greenglide, you posted a minute before me. You are in the position that I do not want to be in! You have had a DB pension thrust upon you and now you could be locked into the £10,000 limit. I wonder whether the interpretation of the rule is correct.

xylophone

You have had a DB pension thrust upon you

What a very sad position to be in........:rotfl:

greenglide

..... since I had always assumed that I could defer when I reached 60 (pension age for LGPS given my age, number of years service, number of years since I left, phases of the moon, other random factors) I was gutted to learn I couldn't defer.

Strangely enough if I had left later or hadn't been there as long (rule of 85?) I could have deferred.

Very odd. Only the public sector could have dreamed it up.

kidmugsy

greenglide wrote: »

Very odd. Only the public sector could have dreamed it up.

I doubt that anyone dreamt it up: it's probably just an unintended consequence of the general piling up of legislation over the years.

jamesd

FatherAbraham wrote: »

Yes, but that's not much good if one were going to use those annual £40k allowances already.

Agreed.

FatherAbraham wrote: »

You imply that some DBs don't make actuarial increases if commencement is deferred until after normal retirement age. People with those types of benefits will have to choose between losing income and losing £30k of the annual allowance for the rest of their contributing lives.

This is what I was on about the other day, and everyone seemed to think it wasn't a problem.

Not me. I do think that is a problem. It would place people in a position where they have a choice that I don't think they should have to make.

kidmugsy

alanbee wrote: »

My plan would be to top up my income by about £5k per year from the pot,

Consider a phased drawdown where you withdraw (say) £6k p.a. of which 25% is tax-free and the rest tax-exposed. If that bit paid tax at 20% you end up with a total of £5100 after tax. If some of the tax-exposed money falls within your personal allowance, so much the better.

atush

alanbee wrote: »

That was my other concern,

If I took the pot (which is around £83k) where do I put the cash to ensure it stays tax free. If I top up my income from the pot, how does the taxman know how much I am taking and hence how much to tax me?

Alan

If you dont need the cash to spend, and want it to stay tax fee (and maybe growing) why take it out of the pension at all? Leave it to grow tax free and draw it down slowly, when you need it leaving tthe pot to grow more?


As said above, if you dont have enough income to cover your personal allowance (PA) then draw down enough each year to remain tax free. And if you dont need that money, whack it in a S&S isa to remain tax free there.

I dont see the point of drawing down a pension, and paying tax on it as income, then whacking it in an isa to make much sense,

Sterlingtimes

After some searching, I found the Treasury's 21 July 2014 document. The £10,000 limit applies to those who draw down more than their tax-free lump sum from a defined contribution pension. There is no mention, so far as I can see, of drawing benefits from a defined benefit scheme. I feel happier having read the consultation document.

https://www.gov.uk/government/upload...nse_online.pdf

Freedom and choice
in pensions:
government response to the
consultation

those who choose to draw down more than their tax-free lump sum from a defined contribution pension will still be able to benefit from further tax-relived pension saving, and make further tax-free contributions to a defined contribution pension of up to £10,000 per year. This means that following their first flexible withdrawal, an individual will be able to contribute up to £10,000 a year with tax relief to a defined contribution pension. This covers 98% of pension savers over the age of 55

kidmugsy

Fireboss47 wrote: »

I recently started drawing an occupational pension and still have a part time job for which I am paid a salary.
The two incomes take me slightly over my £10000 tax allowance. I am asking advice if it is best to take the whole tax hit against my salary and leave the pension alone, or is it best to split the obligation between the two?
Is there any advantage in either?

You could always see if your employer would let you contribute to a pension by salary sacrifice: that could get you down to the personal allowance, and prove profitable when you come to take the money out. The new flexibility in drawing pensions makes them much more attractive for people who are already old enough to draw them i.e. 55 or older.