Claiming Deferred LGPS Pension While Continuing to Work in Current Private Sector Role

1sadoldlady

Age 55, employed Full Time with Gross salary £44K. Not working for Local Government but now in Private Sector. Currently contributing to Company DC Pension scheme at 6%, company matches my contribution.

Drawing on a DB Pension which I received earlier in life at £3K Gross pa.

Have a Deferred LGPS Pension, £4k pa and £10K lump sum.

I would now like to take my Deferred LGPS Pension, continue working in my current role (contributing to DC pension) . Interested to seek comments on how this could affect my tax, how I contribute to my current DC Pension (MPAA) and other possible things to be aware of?

Dazed_and_C0nfused

Are you Scottish resident for tax purposes?

1sadoldlady

Dazed_and_C0nfused said:

Are you Scottish resident for tax purposes?

No, I'm not a Scottish resident for tax purposes.

Marcon

1sadoldlady said:

Age 55, employed Full Time with Gross salary £44K. Not working for Local Government but now in Private Sector. Currently contributing to Company DC Pension scheme at 6%, company matches my contribution.

Drawing on a DB Pension which I received earlier in life at £3K Gross pa.

Have a Deferred LGPS Pension, £4k pa and £10K lump sum.

I would now like to take my Deferred LGPS Pension, continue working in my current role (contributing to DC pension) . Interested to seek comments on how this could affect my tax, how I contribute to my current DC Pension (MPAA) and other possible things to be aware of?

The £10K tax free lump sum is, as the name suggests, tax free. The pension itself is added to your other income and will be taxed at your marginal rate.

Drawing benefits from a defined benefit scheme (the LGPS is a DB scheme) has no impact on the MPAA.

joan1234

Hello I am in similar position, the HMRC site mentions if you are taking pension and contributing pension your annual allowance drops from £40,000 to £4,000. Is this isolated to drawing pension from DC schemes? Or any schemes? Thank you in advance. 

Linton

joan1234 said:

Hello I am in similar position, the HMRC site mentions if you are taking pension and contributing pension your annual allowance drops from £40,000 to £4,000. Is this isolated to drawing pension from DC schemes? Or any schemes? Thank you in advance. 

The reduction in Annual Allowance only applies if you drawdown taxable money from a DC scheme. It does not apply to taking the tax free lump sum nor to taking a DB pension.

Linton

1sadoldlady said:

Age 55, employed Full Time with Gross salary £44K. Not working for Local Government but now in Private Sector. Currently contributing to Company DC Pension scheme at 6%, company matches my contribution.

Drawing on a DB Pension which I received earlier in life at £3K Gross pa.

Have a Deferred LGPS Pension, £4k pa and £10K lump sum.

I would now like to take my Deferred LGPS Pension, continue working in my current role (contributing to DC pension) . Interested to seek comments on how this could affect my tax, how I contribute to my current DC Pension (MPAA) and other possible things to be aware of?

Taking a DB pension does not affect the limit on contributions to a DC pension.

Pensions are taxed under PAYE in exactly the same way as if you were employed by the provider except for there being no NI.  HMRC set up a separate tax code for each income stream splitting the tax allowance. You can ask HMRC to change the split if you want.

joan1234

Linton said:

1sadoldlady said:

Age 55, employed Full Time with Gross salary £44K. Not working for Local Government but now in Private Sector. Currently contributing to Company DC Pension scheme at 6%, company matches my contribution.

Drawing on a DB Pension which I received earlier in life at £3K Gross pa.

Have a Deferred LGPS Pension, £4k pa and £10K lump sum.

I would now like to take my Deferred LGPS Pension, continue working in my current role (contributing to DC pension) . Interested to seek comments on how this could affect my tax, how I contribute to my current DC Pension (MPAA) and other possible things to be aware of?

Taking a DB pension does not affect the limit on contributions to a DC pension.

Pensions are taxed under PAYE in exactly the same way as if you were employed by the provider except for there being no NI.  HMRC set up a separate tax code for each income stream splitting the tax allowance. You can ask HMRC to change the split if you want.

So if you contributed the same amount to your DC pension as you were receiving as your DB pension you would not pay any extra tax?

joan1234

Linton said:

joan1234 said:

Hello I am in similar position, the HMRC site mentions if you are taking pension and contributing pension your annual allowance drops from £40,000 to £4,000. Is this isolated to drawing pension from DC schemes? Or any schemes? Thank you in advance. 

The reduction in Annual Allowance only applies if you drawdown taxable money from a DC scheme. It does not apply to taking the tax free lump sum nor to taking a DB pension.

I have the option to receive 25% tax free lump sum and £7000pa pension, added to my current salary. Will lump sum or the pension be used in the calculation for Plan 2 student loan repayments?

Dazed_and_C0nfused

joan1234 said:

Linton said:

1sadoldlady said:

Age 55, employed Full Time with Gross salary £44K. Not working for Local Government but now in Private Sector. Currently contributing to Company DC Pension scheme at 6%, company matches my contribution.

Drawing on a DB Pension which I received earlier in life at £3K Gross pa.

Have a Deferred LGPS Pension, £4k pa and £10K lump sum.

I would now like to take my Deferred LGPS Pension, continue working in my current role (contributing to DC pension) . Interested to seek comments on how this could affect my tax, how I contribute to my current DC Pension (MPAA) and other possible things to be aware of?

Taking a DB pension does not affect the limit on contributions to a DC pension.

Pensions are taxed under PAYE in exactly the same way as if you were employed by the provider except for there being no NI.  HMRC set up a separate tax code for each income stream splitting the tax allowance. You can ask HMRC to change the split if you want.

So if you contributed the same amount to your DC pension as you were receiving as your DB pension you would not pay any extra tax?

It isn't usually as simple as that.

Often you will pay the same amount of tax irrespective of the DC contribution but would get basic rate tax relief added to your DC contributions.

Difficult to say any more that without some specifics.

joan1234

Dazed_and_C0nfused said:

It isn't usually as simple as that.

Often you will pay the same amount of tax irrespective of the DC contribution but would get basic rate tax relief added to your DC contributions.

Difficult to say any more that without some specifics.

Thank you for your reply, So I would pay similar tax but some tax would be refunded to the pension scheme?
Dazed and Confused it a very fitting name- thats exactly how the topic of tax and pensions leaves my poor old brain.