DWP Pension Underpayments

PensionStress

Over the last three financial tax years I have been trying to resolve an issue with DWP and HMRC that has resulted with my being sent back and forth between the two and each blaming the other for the problem ! What is the problem ? It is that the figure that DWP supply to HMRC, each financial year, regarding how much I will receive in State Pension payments. The figure supplied by DWP does not and has never corresponded with the actuall payments into my bank ! The result of this difference is that I am then charged tax on my company pension due to, as explained by HMRC, 'exceeding the current tax threshold allowance' Despite spending hours on the phone with DWP and HMRC going through what they actually paid into my bank and agreeing that my figures correspond exactly with theirs and agreeing on the amount of the 13 payments they made they then immediately give a figure of up to and over a thousand pounds more than that paid to me. HMRC then demand tax on the higher amount which has never been received by me or my bank ! I have made official written complaints to DWP with no success and HMRC sympathise but explain it has nothing to do with them as they don't set the State Pension rates and put me back to DWP who then blame HMRC and explain they don't set the tax rates ! I am at a loss ! Most tax years I am under the tax threshold by a considerable amount but this 'ghost payment' takes me over the allowance every financial year. Anybody else suffered like this ? More importantly any ideas how to resolve it ! 

Dazed_and_C0nfused

Firstly State Pension isn't taxed on what you receive, it's what you were entitled to so there is often discrepancies.  

But that wouldn't account for a thousand pound difference.

Can you pick one tax year and provide the following details,

State Pension in your last tax code notice for that tax year

State Pension in your latest tax calculation (P800 or PA302) for that tax year

Your weekly State Pension amount from the start of April in that tax year (the April at the beginning of the tax year not at the end)
The State Pension documented on the form DWP usually send between Christmas and the start of the new tax year (the one relevant to the point above).

NB. You will only resolve this on here by going into the detail.

PensionStress

Hi Sorry maybe I wasn't clear enough. I'm not saying I was taxed on my State Pension what I said was I'm taxed on my company pension but say that tax is based on the tax allowance for this year of £12570 So as an example, lets say the company pension is £3k a year and the state pension I actually receive into my bank is £9444.76 so a total of £12444.76 received but what DWP inform HMRC they paid me is, as an example, £10200.00 so a total income of £13200.00  HMRC then tax £755.24 as above the current allowance from my company pension. No issue if I actually get that £10200 from DWP but when you don't it's rather annoying. 

Dazed_and_C0nfused

I understand that but tax is all about the detail and it isn't clear yet where things have gone wrong.

Unless you provide that information no one can tell where things are going wrong and who, if anyone is wrong.

Is it possible DWP owed you some State Pension (mentioned on BBC news earlier this week and affects w lot of people) and you got a lump sum of arrears?  Which would be taxed on the tax year it was due for, not when it was paid.

PensionStress

So in reply to your question regarding DWP and arrears. I provided to both DWP and HMRC the letter of complaint sent originally and solely to DWP where I laid out to them what went into my bank for each of the following years 2019/20 and 2020/21 and what they told me I would be receiving for the 2021/22 year. They were as laid out below.

2019/20 DWP informed HMRC I would receive -
£8847.88 but what actually went into my bank was £7427.24 which DWP agreed with.
A shortfall of £1052.23

2020/21 DWP informed HMRC I would receive -
£9215.44 but what actually went into my bank was £7688.57 of which £368.41 was, I think, a payment for underpayment during the 2019/20 year. I'm afraid I can neither confirm or deny this as DWP are unable to explain or even acknowledge the payment. A shortfall of £1526.87

2021/22 DWP informed HMRC I would receive -
£9445.82 but based on what I have currently received I will actually get £9336.52
A shortfall of £109.30 so heading at last in the right direction.

Now with regard to a lump sum of arrears yes I did receive, a few days after my letter of complaint, a payment of £2978.89 
Again DWP have ignored both verbal and written requests to explain what this payment is for or supply a breakdown of which years this payment relates to and how much was paid for each year and so I am unable to offer HMRC anything to work with. At this very moment I've given up and will just pay the requested tax and hope they go away and leave me alone but of course that seems most unlikely. 

xylophone

Was the tax year 2019-20 the first year in which you became eligible for SP?

https://www.gov.uk/new-state-pension/what-youll-get

You received a letter as above?

What was the weekly amount of SP you were told you would be paid? 

It was at least £168.60?

What was the amount above £168.60?

What  were the figures for 20/21?

And for the current tax year?

xylophone

According to the self assessment notes

Box 8 State Pension

Use the letter ‘About the general increase in benefits’ that the Pension Service sent you to find your weekly State Pension amount.

Add up the amount you were entitled to receive from 6 April 2019 to 5 April 2020 and put the total in box 8. Do not include any amount you received for Attendance Allowance.

If your State Pension changed during the year or you only received it for part of the year, multiply each amount by the number of weeks that you were entitled to receive it. Add up your

amounts carefully.

If you do not have the letter from the Pension Service, phone them on 0800 731 0469 (textphone 0800 731 0464) and ask them for the information.

Alice_Holt

It would seem to me that there may be correlation between the arrears of £2,978 and those differences.

2019/20 Actual payments £7427   HMRC figure £8848 ;
2020/21 Actual payments £7688   HMRC figure £9215.

A difference totalling £2,948.

As Dazed & Confused says state pension isn't taxed on what you receive, it's what you were entitled to so there is often discrepancies.  A disparity of c.£30 could well be explained by this - particularly if (as likely) the HMRC figures include the arrears (that you were entitled to).

Hopefully when you eventually get the arrears breakdown it will become clearer.

As the Pension Service are currently even struggling to pay pensions on time (see https://forums.moneysavingexpert.com/discussion/6287775/the-day-after-my-state-pension-qualifying-age-nothing-heard-from-the-dwp/p1), I think your pragmatic decision to pay the tax and patiently wait for the reply from the Pension Service is sensible. 

calcotti

Worth adding too that even in a full year the amount taken as State Pension for tax purposes is 52 x the weekly rate. This will never correspond to the total of the payments actually received.

Dazed_and_C0nfused

As others have said this is almost certainly due to the State pension arrears you have been paid by DWP.

These are taxable in the tax year the relate to, not when they were paid.

So the calculation are highly likely to be correct.

But what is odd is that DWP haven't supplied you with details of which (tax) year the arrears have been paid for.

There is a tread about this on an Accountancy website and someone with a client who has received arrears said they had automatically got these details from DWP - that is what you need to get and chances are everything will be correct and you can enjoy whatevers left from the arrears 

PensionStress

Yes

No

I questioned the amount stated in writing at the time but was told by DWP it was correct as I only had 49 years of contributions !

£136.67 rising to
£142.97 for the second month.

20/21
£145.77 rising to
£153.57

21/22
£153.57 rising to
£181.63 in May 21

Of course it would help if DWP would supply the breakdown but currently I may as well be talking to Sooty & Sweep.

In answer to your questions Xylophone. Not sure how you reply directly but it won't allow me to post with your link.