Can I avoid tax

ChrisSargent

I know I had an old NHS pension and I have now found out I was only in for 1 year 11 months so I don't get a pension. I have been told I can claim back the £2000 contributions but that I'll have to pay tax and NI on it first.
Obvious question is there a way I can avoid paying it - no point leaving it where it is as it's just dead money

Thanks in advance

greatkingrat

Do you have any other pensions? If so, you can just pay the money straight back into a different pension scheme and get the tax relief back. It might also be possible to get the NHS to transfer the accrued contributions directly to another scheme?

greenglide

You have said "on old NHS pension". When did you leave NHS employment?

It is normally at the point of leaving that decisions are made about deferring pensions or return of contributions and often there is a time limit on this.

Are you over 55? So they say that you must transfer out now or have the contributions back? Refund of contributions is a very, very bad deal as along with the tax and NI to pay you also lose the employers contributions which would be much bigger. You should transfer it to another scheme (existing employers scheme?).

hyubh

ChrisSargent wrote: »

I know I had an old NHS pension and I have now found out I was only in for 1 year 11 months so I don't get a pension. I have been told I can claim back the £2000 contributions but that I'll have to pay tax and NI on it first.
Obvious question is there a way I can avoid paying it

No, because the tax and NI due isn't on the payment as such, but for putting you back in the position you would have been had you not joined the scheme in the first place (being a scheme member meant you got tax relief, and given the scheme was contracted-out then, a lower rate of NI.)

no point leaving it where it is as it's just dead money

Right, because you weren't in the scheme long enough to earn an actual pension. As others have said, transferring out would be the better option, since that way, you'll get a CETV to put somewhere else, which will reflect an employer contribution too.

LHW99

General question to which I don't know the answer, but someone else may:

If this was a DB scheme, however small, does that mean he would have to get independent advice to transfer, which could cost as much as the pension is worth in this case?

Kynthia

LHW99 wrote: »

General question to which I don't know the answer, but someone else may:

If this was a DB scheme, however small, does that mean he would have to get independent advice to transfer, which could cost as much as the pension is worth in this case?

It's not a pension transfer as there is no pension. The OP wasn't a member of the DB scheme long enough to qualify for a deferred pension. When that is the case you get a refund of your contributions less certain deductions, or both the employee and employer's full contributions can be moved to another pension scheme. No advice is needed and it doesn't need to be moved to another DB scheme (as is often the case) as it's a money transfer not a pension transfer and no benefits are being given up. Often the often to move the full funds to a pension scheme has a time limit on it so I'm doubtful the OP has this option any more.

ChrisSargent

Kynthia wrote: »

Often the option to move the full funds to a pension scheme has a time limit on it so I'm doubtful the OP has this option any more.

Yes you are correct. There is a time limit of 2 years to be able to transfer the contributions. I am only left with the option to reclaim the contributions minus tax and NI. Filled in the form and posted it this morning. When the money hits my bank (which will be a little south of 2K) I'll put it in my ISA ( having missed this tax year too!!!!!) until my other pensions are sorted and then pay it into whatever I end up with as an AVC (of sorts)

So I guess the next question is when I pay t into my ISA can I claim the tax back?

p00hsticks

ChrisSargent wrote: »

So I guess the next question is when I pay t into my ISA can I claim the tax back?

No you can't.

mgdavid

ChrisSargent wrote: »

Yes you are correct. There is a time limit of 2 years to be able to transfer the contributions. I am only left with the option to reclaim the contributions minus tax and NI. Filled in the form and posted it this morning. When the money hits my bank (which will be a little south of 2K) I'll put it in my ISA ( having missed this tax year too!!!!!) until my other pensions are sorted and then pay it into whatever I end up with as an AVC (of sorts)

So I guess the next question is when I pay t into my ISA can I claim the tax back?

might be better to put it into an interest-paying current account?

System

Hi

As it is a refund of contributions "you" will have to settle the NI and Income Tax.

This will give a state pension amount to collect eventually. The amount paid back to you should have accrued a small amount of interest, and this may be listed as such.

The refund could perhaps then be put into a pension or AVC or similar vehicle and tax relief claimed.

So you may actually be quids in eventually...