Tax On Pension

dazanteney4

Hello,
Am i right in saying that when my dad takes his pension pot (about £5500 per year) along with this state pension (£113.10 per week = £5881py) that he will then pay 20% income tax?

Thus making his yearly income £9104 rather than £11831 without any tax?

Thanks

Darren

dunstonh

He will still have his personal allowance but anything above that will be subject to 20% tax.

dazanteney4

dunstonh wrote: »

He will still have his personal allowance but anything above that will be subject to 20% tax.

Is the personal allowance is £10,500 per year including the state pension?

CLAPTON

dazanteney4 wrote: »

Is the personal allowance is £10,500 per year including the state pension?

the tax allowance will be 10,600 in tax year 2105-16 (always subject to the march budget of course)

dazanteney4

Thank you!

anamenottaken

CLAPTON wrote: »

the tax allowance will be 10,600 in tax year 2105-16 (always subject to the march budget of course)

to add: and the State Pension is included in the calculation of taxable income

jamesd

dazanteney4 wrote: »

Hello,
Am i right in saying that when my dad takes his pension pot (about £5500 per year) along with this state pension (£113.10 per week = £5881py) that he will then pay 20% income tax?

Thus making his yearly income £9104 rather than £11831 without any tax?

It'll be about £11,564.

Does your dad know that if he defers claiming his state pension it will increase by 10.4% a year if he reaches state pension age before April 2016, or 5.8% after that? The 10.4% is about 50-70% inheritable by a spouse and both are inflation-linked.

When you write about him having a pension pot, is it a real pot of money invested or is it a final or average salary type of scheme? If it's the first type, deferring the state pension offers far more income for his money than buying an annuity would. It'd also be very important to not buy an annuity from the place his pension pot is at but to shop around via an IFA, even more so if his health isn't perfect.

dazanteney4

jamesd wrote: »

It'll be about £11,564.

Does your dad know that if he defers claiming his state pension it will increase by 10.4% a year if he reaches state pension age before April 2016, or 5.8% after that?

He doesn't retire for about 5 years he just came out with it this morning.

When you write about him having a pension pot, is it a real pot of money invested or is it a final or average salary type of scheme?

Its a pot not a final scheme, he has some time to work things out... I'm sure whoever comes into power will change it all again!

jamesd

At least most of the changes have been in the positive direction recently.

Glad he has a while to go, that should increase his potential income.