Recently Retired, Do I Need to Inform HMRC?

scoot65

I've recently retired from my Local Government / Local Authority post. I'm 57 and have decided that I'm not going to take my LGPS pension yet (I also have no other income).

Previously any tax that I had to pay was done via PAYE with my employer.

Now that I'm retired, but not taking my works pension yet, do I need to inform HMRC of this fact?  I'm thinking about tax liability with regard to interest earned on savings accounts etc 

Dazed_and_C0nfused

Unless the interest is £10,000 or more then no you don't need to notify them.

You may well be due a tax refund for the current tax year.  Which HMRC will automatically refund next summer but you can claim it earlier if you particularly want to.

Have you checked your State Pension forecast to see if you will need to make any voluntary contributions to reach the standard new State Pension? 

scoot65

Many thanks Dazed.

Well, I certainly won't be making £10k in interest, so it looks like I don't have to worry about that bit. Also good to know that I may be entitled to a tax refund.

Regarding the state pension. This financial year I reached the "£185.15 is the most you can get.....you cannot improve your forecast anymore" level. 

Dazed_and_C0nfused

If you are going to have a few years with no earnings or pension income you could do worse than contribution the maximum £3,600 (gross) into a personal pension or SIPP and take advantage of the basic rate tax relief you will get even as non taxpayer.

And can then take the money out without incurring any tax liability as you will have lots of unused Personal Allowance.

An easy £720 profit.

scoot65

I hadn't considered opening a SIPP at all. I'll give it some consideration and do some reading up.

I'm intending to ask for a LGPS pension forecast when I reach 60 (which will be in less than 3 years' time) to see what the figures are like and then maybe do the same at 61 / 62.

Is that figure of £720 for each year I contribute the max £3,600 the Govt. will also contribute £720?

MX5huggy

No you put in £2880 it’s topped up to £3600 then you take 25% out tax free 75% is taxable but as you seem to have income under the personal allowance you won’t pay any tax on it. 

To take this to the next level for this tax year you could put all or earned income this tax year into a SIPP get 25% added to it and then get it out over the coming years again without paying tax. 

Then have you got a LGPS quote for now? You might be surprised, especially if you’ve got no income for 3 or 4 years you’ll just pay tax on the extra pension you get buy waiting then you’ll have to live till 84 ish to break even but the State pension is going to kick in £9k plus these years before then seem to be were you need the income. 

xylophone

Is that figure of £720 for each year I contribute the max £3,600 the Govt. will also contribute £720?

A person aged under 75 with no relevant earnings can make a net contribution of up to £2880 to a personal pension and the pension provider will claim up to £720 from HMRC and add it to that person's "pot".

This adds up to up to a gross £3600.

scoot65

Many thanks for the clarification regarding the £720.

Regarding the LGPS quote. I've been told that due that I'll automatically get a quote posted out to me shortly. It'll be interesting to see what the figures are.

I have 25 years Final Salary years up to 31 March 2014 and I also have from April 2014 to present day in the CARE scheme.

   

Silvertabby

scoot65 said:

Many thanks for the clarification regarding the £720.

Regarding the LGPS quote. I've been told that due that I'll automatically get a quote posted out to me shortly. It'll be interesting to see what the figures are.

I have 25 years Final Salary years up to 31 March 2014 and I also have from April 2014 to present day in the CARE scheme.

   

You will have R85 protections in respect of your pre 2008 accruals - but as R85 is still linked to a minimum retirement age of 60 you won't get the full benefit if you take your pension before then.

scoot65

Silvertabby said:

You will have R85 protections in respect of your pre 2008 accruals - but as R85 is still linked to a minimum retirement age of 60 you won't get the full benefit if you take your pension before then.

Thanks Silvertabby, good point. I don't intend to take my LGPS pension before I'm 60.

With regard to R85 protections. My annual statement shows my membership at 31-03-14 being 25 years 212 days it also shows CARE Pension Build up post 01-04-14.

Reading last year's statement I can see that from 01-04-2008 the calculation changes to 1/60 x membership.

So R85 protections are only up to pre 2008? What happens to the pension calculations / years inbetween 2008 and 2014?

  

Silvertabby

scoot65 said:

Silvertabby said:

You will have R85 protections in respect of your pre 2008 accruals - but as R85 is still linked to a minimum retirement age of 60 you won't get the full benefit if you take your pension before then.

Thanks Silvertabby, good point. I don't intend to take my LGPS pension before I'm 60.

With regard to R85 protections. My annual statement shows my membership at 31-03-14 being 25 years 212 days it also shows CARE Pension Build up post 01-04-14.

Reading last year's statement I can see that from 01-04-2008 the calculation changes to 1/60 x membership.

So R85 protections are only up to pre 2008? What happens to the pension calculations / years inbetween 2008 and 2014?

  

The protections were staggered when the changes were first factored in but, at your age, only your pre 2008 benefits are protected by R85.

Assuming you take your LGPS benefits at 60:

Up to 30 March 2008. = no reduction.

1 April 2008 to 31 March 2014 = reduced for every year taken before age 65

1 April 2014 2014 to date of leaving = reduced for every year taken before SPA.

The reductions aren't just whole years, though, they are calculated on a daily basis.