State pension reduction

LittleVoice

BoxerfanUK wrote: »

You mention no NI payable on pension income, so am I right in thinking that when I draw my pension I will only pay NI on earnings from any other job I take! Also, when I reach the point whereby I have my full qualifying years for the state pension does this mean I no longer pay NI at all? Or do I still ALWAYS have to pay NI on any earnings irrespective.

Whether or not you are drawing your occupational pension, you continue to be subject to NI contributions on earned income until you reach state retirement age. If you work, you pay. Once you reach state retirement age, no further NI contributions should be taken from your pay (as long as your employer knows your age).

margaretclare

dunstonh wrote: »

It has nothing to do with state pension.

The figures is £20,900 this tax year and its all income. This includes savings account interest and dividends. If you earn over this amount, every £2 exceeded removes £1 of your age allowance.

Hello Martin

This illustrates why it's essential for you and your spouse to keep your incomes separate, and that includes pensions, interest on savings, the lot.

The reason I say that is that if - as many people think we should - we were to get all our pensions income via my husband (i.e. old-style, what is erroneously talked of as a 'pensioner couple') we would be well over this limit.

Because we get all our pensions income separately, total somewhere near £25K a year between us, we don't fall into this trap.

HTH

Margaret

Andy_L

BoxerfanUK wrote: »

I can go at 55 with 40/80ths of salary (20K) or if I work another 2.5 years I get another 5/80ths which takes me to absolute max of 45/80 + 3 times lump sum on top (each year over 20 counts as double for pension purposes)

Unfortunately to get years of service beyond 40 only years above normal retirement age (ie 60) count, unless you've got some "old-school" reserved rights to retire at 55. If you haven't don't forget that your pension will be reduced further for taking it 5 years early.

Andy_L

roddydogs wrote: »

Always take the "lump Sum" its untaxed!

If this was a DC money purchase scheme that would probably be correct. As this is a final salary scheme with a 12/1 commutation ratio it depends on individual circumstances (eg tax status, spouse's provision, other income, health etc)

BoxerfanUK

Andy L. Yes they are reserved rights to go at 55 on 40/80 (well, 41/80 to be exact) or 45/80 at 57.

What a great forum this is btw, with all you knowledgeable people :j

jamesd

BoxerfanUK, NI on earnings from employment only and that stops at 65, even if you continue to work.

The investments are 100% inherited so those provide 100% spouses pension, an advantage for the investing approach.

If your spouse doesn't have a pension of their own it's still a useful idea to start a personal pension in their own name to top up their taxable income to about 10,000 a year, to fully use their personal and later age allowances. Up to 3600 a year after tax relief can be contributed even if they aren't working and they will get that basic rate tax relief anyway. Assuming that they are the same age as you and get 9% after inflation on investments this much would provide them 6450 a year in pension at 65 if they don't take a lump sum or 4840 a year plus 32000 lump sum.

The S&S ISA investing approach is the best way to go for now, so you can get comfortable with investing and decide on the basis of your experience and comfort level after a few years of it.

roddydogs, the extra lump sum reduces the pension by enough to require significantly good investment returns to match it. It's not that hard to beat it but doing it with cautious investments isn't so easy. It all depends on how BoxerfanUK will invest the extra lump sum. You're looking at needing 8% return after inflation (say 12-13%) and there are quite a few people here who think that just 6% ignoring inflation from overpaying or repaying a mortgage is a good deal, something that would ensure that BoxerfanUK would be substantially worse off because it's only half the needed return.