Pension credit and Sipp

QrizB

Oddjob said:

I have told them about the Sipp, they asked for statements which I sent.

How do they work out the Notional income?

I don't know the formula but I imagine it will be similar to the savings one (which is £1/wk for every £500 over a threshold value).

There's a bit more detail here:
https://www.gov.uk/government/publications/pension-credit-technical-guidance/a-detailed-guide-to-pension-credit-for-advisers-and-others#pensions-flexibilities

... but this article seems to set it out more clearly:

https://benefitsinthefuture.com/notional-income-from-pensions-too-notional-for-some-advisers/

Notional pension income is the commonest application of these rules and has a specific method of assessment. The notional income attributable to pension savings is calculated using the Government Actuaries Department tables for annuities. These tables assess the income per £1000 of pension savings using the saver’s age and the 15 year gilt rate published in the Financial Times.

And the author of that article wrote this reply to someone asking here how to calculate it:

All you have to do is look up the 15 year Gilt rate in the table found at https://markets.ft.com/data/bonds . Click on ‘Table’ and read down to 15 year.  Today’s figure is 1.70%.  Round that down to the nearest .25% which gives 1.5%.  In the GAD table then read across to 1.5% in the Gilt Index Yield row and down to the persons age. e.g. age 67 gives you a result of £53.  That is how much per annum per £1000 of pension savings is the notional annuity.  SO for someone with £27,632 of savings they would have a figure of £1,464.50 annuity per year.

I don't have the GAD tables (this isn't my area of expertise, sorry) but you can see how it's worked out; I would guess the end result will be something roughly around £1 per week for each £1000 in your SIPP.

sevenhills

Oddjob said:

So does that mean it will not effect my weekly entitlement?

I should perhaps add that I live alone and have no other income.

If you are receiving the state pension and pension credits, that is classed as earnings, in regard to taxable income.

Oddjob

 

p00hsticks said:

Oddjob said:

I shouldn't have to pay tax as I am not earning anything,

Donlt forget that any State Pension you receive is taxable but tax is not deducted at source. It therefore reduces your avaiable tax allowance for other income ....

Thanks.  I don't get the full allowance of State Pension - hence qualifying for Pension Credit - and only get a small private pension of £89 a month.  I have no other income apart from PIP which doesn't come into the equation for tax purposes, so I am well within my Personal tax allowance.

Oddjob

sevenhills said:

Oddjob said:

So does that mean it will not effect my weekly entitlement?

I should perhaps add that I live alone and have no other income.

If you are receiving the state pension and pension credits, that is classed as earnings, in regard to taxable income.

I didn't think that Pension Credit was taxable?

According to .GOV, both PIP and Pension Credit are tax free benefits.

Alice_Holt

Oddjob said:

sevenhills said:

Oddjob said:

So does that mean it will not effect my weekly entitlement?

I should perhaps add that I live alone and have no other income.

If you are receiving the state pension and pension credits, that is classed as earnings, in regard to taxable income.

I didn't think that Pension Credit was taxable?

According to .GOV, both PIP and Pension Credit are tax free benefits.

     You are correct.   It's not:
    https://www.gov.uk/income-tax/taxfree-and-taxable-state-benefits

molerat

Oddjob said:

I asked for £5000 and got it, less the tax that was paid on it.  It was the first payment, I needed it to change my car.

I knew that tax would be deducted but didn't expect it to be quite as much.

The thing that needs sorting out is my tax code which I am waiting for the tax office to sort out, as you say, at the end of the tax year. 

When both myself and MrsM took first SIPP withdrawals we got tax codes within days.  If you take a first dip of less than£1K taxable no tax will be deducted then when the code is issued you can take further withdrawals correctly taxed.

Oddjob

molerat said:

Oddjob said:

I asked for £5000 and got it, less the tax that was paid on it.  It was the first payment, I needed it to change my car.

I knew that tax would be deducted but didn't expect it to be quite as much.

The thing that needs sorting out is my tax code which I am waiting for the tax office to sort out, as you say, at the end of the tax year. 

When both myself and MrsM took first SIPP withdrawals we got tax codes within days.  If you take a first dip of less than£1K taxable no tax will be deducted then when the code is issued you can take further withdrawals correctly taxed.

Thank you, I didn't know that at the time, I had always put it in the SIPP with the intention of it being a car fund as I knew I would have to be changing my car at some point,  I have to say I was very disappointed that they took so much in tax but it will be sorted I am sure at the end of the tax year and I will get it back.  Hopefully, as I am below the personal allowance, no further tax will be taken on future withdrawals.

sevenhills

Oddjob said:

I didn't think that Pension Credit was taxable?

According to .GOV, both PIP and Pension Credit are tax free benefits.

I just assumed that since a pension is taxable money, so too would be something similar to a pension, even with pension in its name.