Trying to understand

just_jayn

My husband had 3 pensions, he sadly died in February. The second pension contacted me due to the pension changes and asked me I wanted to defer until April 1st as I would pay no tax on it. The second pension I called and asked if they would do the same, they said no, they would start the pension from the date of his death. His biggest pension have been so slow to respond, my first payment date is 1st May and will be on the emergency tax code, I fail to really understand why they have delayed it so long and why I should pay tax on it, sorry my head is mush and I can't figure it out. can anyone help.

jamesd

What happens depends in part on the type of pension because the changed rules only apply to one of the two main types.

For defined contribution or personal pensions the new rules apply and it was a better idea to wait. The second pension people did you a favour by mentioning this. This would be a benefit if it was this type of pension and if he'd already taken money out of it somehow. Otherwise it would have been tax free anyway. I assume that they offered you the whole pension pot value as a tax free lump sum and you said yes.

For defined benefit pensions like final salary or average salary there was no benefit from waiting because nothing has changed. I assume that this is the type of the one that just started paying because there was really no benefit to you from waiting.

The biggest one is probably also a defined benefit pension like final or average salary but I can't be sure. It is likely that the delay was due to the pension scheme trustees having to make a decision and sometimes those meetings happen on fixed schedules.

All pension income is taxable income and it's paid to you via the same PAYE setup used when working. The HMRC rules say that the emergency tax code has to be used for the first payment, then HMRC will try to get a correct tax code to the pension firm to use for alter payments. That will cause any overpaid tax to be refunded in the rest of the payments during the first year.

Sorry I can't be certain about what happened, I just don't have the exact details of the types of pensions that's needed to be more certain.

just_jayn

Thank you for your response Jamesd your right the biggest pension was a final average salary he had worked there 24 years. He took a lump sum 4 years ago and thankfully it still leaves me with a decent income. Thanks for explaining about the pension trustees meetings I had no idea about that. I appreciate your response.

jamesd

Thanks. It seems based on that extra information that each of them has been treating you quite well, aside from not explaining things as well as they might have.

Taking the lump sum four years ago explains why you were told to wait by that pension. They were right and it has made you better off.

What are your plans for the money from that pension where they said you to wait? Are you going to be sort of income? I'm asking because one of the best deals for income is usually to defer the state pension, which will cause it to go up by 10.4% for each year of deferral. You can start to defer once even if you've already claimed it. But this depends on age at least, so I can't be sure yet.

just_jayn

I am female and 61 I am also self employed earning a reasonable income from that. I am hoping to save around £500 a month to grow the savings I already have. The pensions are going to be paid monthly to me.


It was interesting what you said about deferring my pension, if my health stays good I could carry on working until I am 67. I am not sure where the best place is to put my savings but growing my pot is good for when I retire. Thanks for your advice jamesd

atush

You could consider a pension for yourself?

xylophone

Check your new state pension position by obtaining a statement.

https://www.gov.uk/state-pension-statement

You may wish to contribute up to your earned income into a pension of your own until you retire.

https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

http://www.cavendishonline.co.uk/pensions/stakeholder-and-personal-pensions/

just_jayn

Thank you for your responses, you have given me something to think about xylophone.