Advice Needed - Multiple Pension Sources

GunJack

Ey up,

not my usual part of the forum to knock about in, but I have a question...

I have/will have currently 3 sources of pension, all of which will come into play at different times:-

1. preserved Civil Service pension, will be paid when I hit 60
2. current company pension will be paid at 65
3. state pension at 67.

How will tax codes be applied to 1 and 2 as I should still be employed when the CS pension becomes payable, and then how will that change when state pension becomes payable and income is split across 3 pension schemes?

Any advice appreciated

xylophone

Logically all your tax allowances would be set against your earned income with other pensions coded according to whether you are a basic or higher rate tax payer.

You would be well advised to contact HMRC when your occupational/state pension (s) come into payment so that you can be certain that you are paying the correct amount of tax.

GunJack

xylophone wrote: »

Logically all your tax allowances would be set against your earned income with other pensions coded according to whether you are a basic or higher rate tax payer.

You would be well advised to contact HMRC when your occupational/state pension (s) come into payment so that you can be certain that you are paying the correct amount of tax.

ta for that.. so if deferring the CS pension is possible it may save me some tax as it would put me over the 40% threshold.

Once I've retired then, which order will tax allowance be allocated? e.g sp, csp, company pension, or will it depend on how much each is?

zygurat789

GunJack wrote: »

ta for that.. so if deferring the CS pension is possible it may save me some tax as it would put me over the 40% threshold.

Once I've retired then, which order will tax allowance be allocated? e.g sp, csp, company pension, or will it depend on how much each is?

There is no specific order.
State pension is taxable but there is no mechanism for tax to be deducted from it so tax is collected by deducting the value of state pension from the personal allowance to arrive at a tax code. This tax code is usually applied to the largest income source but you can have it allocated wherever you want. If all your allowances are applied to one income source then all other sources will be BR.

xylophone

If all your allowances are applied to one income source then all other sources will be BR.

Possibly not- see https://www.gov.uk/tax-codes/letters-in-your-tax-code-what-they-mean

greenglide

ta for that.. so if deferring the CS pension is possible it may save me some tax as it would put me over the 40% threshold.

If the Civil Service pension doesnt allow deferral or the terms arent very good (my LGPS didnt let me defer when I reached 60) then you can always pay an equivalent amount or similar into another pension scheme.

Does your current scheme do Salary Sacrifice? If so and they allow AVCs by Salary Sacrifice this can be good. DB schemes sometimes allow the AVCs to fund the 25% tax free lump sum (mine does) and that can be a really good deal.

GunJack

xylophone wrote: »

Possibly not- see https://www.gov.uk/tax-codes/letters-in-your-tax-code-what-they-mean

so i could end up with one source at NT and the other two at BR, depending on the amounts involved? or one at NT, one at xxL (where xxL is income source 1 minus the personal allowance at the time) and one at BR?

jem16

GunJack wrote: »

so i could end up with one source at NT

NT is very rarely used and mostly in cases of bankruptcy.

and the other two at BR, depending on the amounts involved? or one at NT, one at xxL (where xxL is income source 1 minus the personal allowance at the time) and one at BR?

If your main income source is higher than your personal allowance then that is the income that is most likely to have the main tax code - ie for this year 1060L. Your main tax code (providing it's not split between two or more incomes) always includes your personal allowance.

if the total of all your other income sources were to be less than the higher rate tax threshold, then the rest would be BR. If you are likely to pay higher rate tax then some may be BR and some D0 or D1.

zygurat789

jem16 wrote: »

NT is very rarely used and mostly in cases of bankruptcy.



If your main income source is higher than your personal allowance then that is the income that is most likely to have the main tax code - ie for this year 1060L. Your main tax code (providing it's not split between two or more incomes) always includes your personal allowance.

if the total of all your other income sources were to be less than the higher rate tax threshold, then the rest would be BR. If you are likely to pay higher rate tax then some may be BR and some D0 or D1.

You will not

"end up"

with an NT (No Tax) code or a 1060L code.
Your state pension will be deducted from your allowances and your other pensions will be BR (Base rate, 20%), just as xylophone's link and I said.

GaleSF63

I don't know if this is a similar situation?

I have 3 pensions. One is a widow's pension (well under the tax allowance) from my husbands occupational scheme and was in payment for a long time when the 2nd (civil service) became payable at 60, and then the state pension a little while after that. I wasn't working when they became payable.

The state pension isn't taxed; the next one (widow's) has the left over allowance taken off it; tax code is L. The CS pension is taxed at base rate; tax code is BR.

It involved 3 tax offices so I wrote to all 3 after I received the 2nd pension, with details of all pensions and which tax office dealt with them. It has all run smoothly since (4 years+).

jem16

zygurat789 wrote: »

You will not ( "end up" ) with an NT (No Tax) code

As I stated.

or a 1060L code.

Will probably happen up until state pension age as the OP is talking about different pensions starting at different ages.

Your state pension will be deducted from your allowances

Yes.

and your other pensions will be BR (Base rate, 20%), just as xylophone's link and I said.

They may be BR as you said. However as xylophone's link pointed out and I said, they may possibly be D0 or D1 as the Op has not given any indication that the total of all 3 pension sources will be less than the higher rate tax threshold.

Of course we are only talking about one of the pensions being BR/D0/D1 as the other pension will have xxxL tax code - could also be K tax code although unlikely given at least some period of contracting out.

So not exactly sure what you are taking issue with?