Pension Freedom

mgdavid

I'm like the pension companies, I'm working on this year's rules, not next.

jamesd

jem16 wrote: »

So what you are saying is that they will go against the PAYE rules and just issue what they like? Posts on the tax board have shown this doesn't happen.

My experience with HMRC is that given the information they have with me used non-cumulative tax codes to correct the tax take.

We've the handy worked example in this discussion. Maybe you'd like to use that as an example question over on the tax board, or perhaps you'd like me to do that, to see what they make of it, if we remove the part about it being the whole pension pot and add that some can be taken initially to give HMRC time to issue an adjusted tax code?

What I expect is that HMRC would initially want to issue a BR code to the pension and increase the tax code number on the job to repay the lump sum tax overpayment. But they might be persuaded to issue a non-BR code to the pension firm to avoid the overcharge in the first place and leave the employment alone.

That non-BR possibility is only relevant if the pension firm can report lump sums independently of income, though.

Soon enough we'll end up with some real data on what HMRC actually does based on what people here experience when they try to get HMRC not to allow a tax overcharge. It'll be interesting to see how good a job they do of not taking too much tax when told that they will if they do nothing.

jamesd

There's a wrong link to the ONS life expectancy tables in the article. The link goes to the period life expectancy tables when the correct one to use for this purpose is the cohort tables.

That mistake also means that the following text "the typical life span for a man who hits 65 in the UK is another 18 years, a woman 21" is wrong and gives life expectancies that are too short.

ONS explains:

"Period life expectancy at a given age for an area is the average number of years a person would live, if he or she experienced the particular area’s age-specific mortality rates for that time period throughout his or her life. It makes no allowance for any later actual or projected changes in mortality. In practice, death rates of the area are likely to change in the future, period life expectancy does not therefore give the number of years someone could actually expect to live"

'The cohort life expectancy answers the question “For a group of people aged x in a given year, how long would we expect them to live, on average, if they experienced the actual or projected future age-specific mortality rates not from the given year but from the series of future years in which they will actually reach each succeeding age if they survive?"'.

jem16

jamesd wrote: »

My experience with HMRC is that given the information they have with me used non-cumulative tax codes to correct the tax take.

Non cumulative tax codes tend to be issued to avoid a large payment of tax ( apart from the obvious emergency tax code use )when the main tax code has been reduced part way through the tax year.

We've the handy worked example in this discussion. Maybe you'd like to use that as an example question over on the tax board, or perhaps you'd like me to do that, to see what they make of it, if we remove the part about it being the whole pension pot and add that some can be taken initially to give HMRC time to issue an adjusted tax code?

James please look back at all of the discussions we have had on this recently and you will notice that I have always said the problem lies with those with only one PAYE source - ie the pension. Mgdavid mentioned this in Post 20.

The discussion you linked to above gives an example where the OP has £25k of other income. This kind of situation is much easier to correct with a BR, D0 or D1 code. If most of the income was to be taxed at 20% but with some at 40% then the BR code could be used with an adjustment to take extra tax via the main tax code provided that is ongoing income.

But they might be persuaded to issue a non-BR code to the pension firm to avoid the overcharge in the first place and leave the employment alone.

Assuming the employment is using the main tax code, what non-BR tax code do you believe they could issue other than D0 or D1 which would both see too much tax taken?

jamesd

Please have a look at SnowMan's post and the HMRC document it mentions. I haven't had time to read it all yet but it appears that HMRC may actually be changing things to do something sensible. Maybe, given that I haven't read it yet. Initially it appears from example 3 on page 11 that HMRC will now accept a P55 form for a lump sum even when there is no other income and will process the tax refund. Which would make most of our discussions obsolete and be a very good thing.

jem16

jamesd wrote: »

Please have a look at SnowMan's post and the HMRC document it mentions.

Already looked at it last night James - just been too busy with family to post.

I haven't had time to read it all yet but it appears that HMRC may actually be changing things to do something sensible. Maybe, given that I haven't read it yet. Initially it appears from example 3 on page 11 that HMRC will now accept a P55 form for a lump sum even when there is no other income and will process the tax refund.

You were able to do that already provided you had exhausted the whole pension pot using form P50 which is now to be called form P50Z. For those people (wisely or otherwise) intending to cash in their whole pension pot after April 6th, this has not changed.

What has changed is the ability to reclaim using Form P55 for those people who are not cashing in the whole pot but who intend making only one withdrawal per tax year. Previously those people would have had to have waited until the tax year ended to claim - this is a sensible move.

Although in saying that, these people could have avoided (and still can) this by taking monthly withdrawals rather than a once per year withdrawal.

What has not changed overall, is the intention to use normal PAYE arrangements and tax the first payment on a Month 1 basis unless a P45 form is already held by the pension provider.

jamesd

Agreed, it's just become moot now they will process the tax refund claim in-year. Well, moot except that we'll still have to explain it.

Rate_tart?_sticks_and_stones.....

Rate_tart?_sticks_and_stones..... wrote: »

We are in a very fortunate position in that we have accrued sufficient pensions, savings, investments etc. that we do not need to rely on one of my former employer's pension of £80,000.

I was made redundant last year and I am now 55. We would really like to access my pension, take the 25% lump sum then ideally further annual lump sums within my tax allowance every year until the £60,000 has gone. We will use this annual sum to pay for holidays for ourselves and my mother and or great-nieces but we could also invest some of it.

I am I correct to say that my only option is still to buy an annuity and that I cannot access this annually but have to have a monthly amount?

I apologise if this is a stupid question. I am ok with money saving in other areas but I find pensions, annuities and investments rather puzzling.

Seems that my question has stirred up some ongoing disagreements about tax. I am afraid I couldn't follow them and wasn't entirely sure that it was answering my question?

Anyhow, I have in the meantime identified 2 products which do what I want, one with LV and the other with the Pru. Aegon don't appear to have anything available yet. So that brings me to a question about advice. Am I correct to say that Pension 'Freedom' now means that I have to pay 3% of £60,000 to an IFA/FA to access one of those products on my behalf? I understand that without the advice o some would find themselves destitute but as I said when starting this thread we are fortunate not to be in that position.

I would appreciate your thoughts on this specific point if possible please.

Thank you

jem16

Rate_tart?_sticks_and_stones..... wrote: »

Anyhow, I have in the meantime identified 2 products which do what I want, one with LV and the other with the Pru. Aegon don't appear to have anything available yet. So that brings me to a question about advice. Am I correct to say that Pension 'Freedom' now means that I have to pay 3% of £60,000 to an IFA/FA to access one of those products on my behalf?

Advice is only needed if you were moving your pension pot from one provider to another and it contained valuable guarantees such as a guaranteed annuity rate.

You may also need to use an IFA if the product you choose will only accept business via an IFA.

Rate_tart?_sticks_and_stones.....

jem16 wrote: »

Advice is only needed if you were moving your pension pot from one provider to another and it contained valuable guarantees such as a guaranteed annuity rate.

You may also need to use an IFA if the product you choose will only accept business via an IFA.

Thank you Jem16. There are no guarantees etc. associated with my pension so it's the product. Back to my research to try to find a product that I don't have to pay a IFA £1800 to access for me. I am happy to pay for a service I need but I do object to paying so much simply to sign me up for a product which I have identified myself.