40% or not 40%???

Beeftub24

When my husband sadly died in 2011 I thought I had informed all of the companies with which he had a pension. Last year a letter arrived for him from one I had missed - long story short - they backdated to 2011 and sent me a lump sum before commencing a monthly payment. This lump sum briefly sent me into the 40% tax bracket so I lost a huge chunk of it. Had the pension started in 2011 I would have paid tax at the lower rate - is it right that I should have lost so much?

atush

First of all, you can pay some of it into a pension yourself. Which you will save tax on.

As for the delayed payment, are you still living in the same place as in 2011? If so, why didnt they tell you about the pension then?

If not, it isnt really their fault you/he didnt claim it when your should have.

Shimrod

It sounds like a defined benefit pension scheme. If so, write to the trustees and ask them for a letter apportioning the lump sum payment into the years in which it was payable. You can then contact the HMRC and sort out the correct amount of tax that should have been paid.

I'm a pension trustee and this is how we handle those situations where we have to provide a lump sum back payment to a pension member. The pension trustee can't sort it out directly as they do not know what other income you might have.

xylophone

See http://www.hmrc.gov.uk/manuals/sammanual/sam121160.htm

"Taxable pension is the amount to which the pensioner is entitled in the tax year. A payment of arrears of pension may be a substantial sum covering a number of tax years and the statutory (accruals) basis should thus be applied on request where it is to a taxpayer’s advantage.

Further guidance on this point is available at SE74101 (2002/03 and earlier years) and at EIM74101 (2003/04 and later years)."

Beeftub24

Thank you to those who have replied, especially Shimrod - I shall follow your advice and contact the trustees.
Xylophone, I will follow your link.
Atush, address hasn't changed; when Pete died he was not at pensionable age so when they wrote to him in 2015 it was only then I realised they were unaware he was gone.

greenglide

So they were paying arrears for a period created because you did not inform them. It is clearly not the pension provider's fault so presumably it is up the HMRC as to whether they will allocate it across the multiple tax years.

I assume that the payment has taken you over the 40% rate for the whole tax year, not because the company has put you on a month 1 code or it is part way through the tax year and would correct itself by the end of the tax year (although this seems unlikely given it is nearly the end of March now).