Deferred Pension and compensation

ColdIron

Bettie said:

The last thing I want is compensation in that tax year if it affects a deferred pension 

I think you can sleep soundly, you have more chance of being hit by a meteor

molerat

Bettie said:

My deferred pension lump sum will be about 90000. My question is will compensation affect the tax position. I read this week the Waspi stuff will be reviewed in December 2024. The last thing I want is compensation in that tax year if it affects a deferred pension 

Ah, so you are saying your deferred SP lump sum will be £90K and not taxed due to you receiving less than you tax free allowance from other income.  I suspect any "compensation" would be taxable income so you are going to have to gamble on that not happening if you are intent on taking the lump sum in the 24-25 tax year although the chances of compensation are minute and of that being paid in the 24-25 tax year even smaller.

xylophone

What lump sum ? 

The OP says

I am about to retire, my official date was Sept 2014 and I've not picked up my state pension .

I assume she means that she was eligible to claim her state pension in 2014 (under the old scheme) but has deferred claiming it until now?

See

https://www.litrg.org.uk/pensions/state-pension/tax-state-pension/putting-deferring-claiming-state-pension

https://www.litrg.org.uk/pensions/state-pension/tax-state-pension/tax-deferred-state-pension-lump-sums

Marcon

Bettie said:

My deferred pension lump sum will be about 90000. My question is will compensation affect the tax position. I read this week the Waspi stuff will be reviewed in December 2024. The last thing I want is compensation in that tax year if it affects a deferred pension 

Delay taking your deferred state pension until the end of March 2025 if you're worried (or optimistic, depending on your viewpoint!).

ColdIron said:

Bettie said:

You pay tax on the full amount if you go into the 20% tax band 
The lump sum will be 90000 ish

No you don't and where did this lump sum come from?

You only pay tax on the pension sums that exceed the £12,570 Personal Allowance and then you have couple of 0% tax bands (the £5,000 Starting Rate for Savings and the £1,000 Personal Savings Allowance) to protect your savings interest

With pension and savings within these bands you may pay no tax whatsoever. If you exceed one or both you only pay tax on the part(s) that exceed those threshold(s) not the 'full amount'

OP is correct. The tax treatment of deferred state pension (for those who deferred at a time when taking it as a lump sum was still an option) is in its own little world. See https://www.litrg.org.uk/pensions/state-pension/tax-state-pension/tax-deferred-state-pension-lump-sums#:~:text=The%20deferred%20state%20pension%20lump,to%20tax%20the%20lump%20sum.

Bettie

molerat said:

Bettie said:

My deferred pension lump sum will be about 90000. My question is will compensation affect the tax position. I read this week the Waspi stuff will be reviewed in December 2024. The last thing I want is compensation in that tax year if it affects a deferred pension 

Ah, so you are saying your deferred SP lump sum will be £90K and not taxed due to you receiving less than you tax free allowance from other income.  I suspect any "compensation" would be taxable income so you are going to have to gamble on that not happening if you are intent on taking the lump sum in the 24-25 tax year although the chances of compensation are minute and of that being paid in the 24-25 tax year even smaller.

Thanks for understanding.  I know its a small chance. Its a lot of money to pay in tax just to go over that band by £1   

Bettie

Marcon said:

Bettie said:

My deferred pension lump sum will be about 90000. My question is will compensation affect the tax position. I read this week the Waspi stuff will be reviewed in December 2024. The last thing I want is compensation in that tax year if it affects a deferred pension 

Delay taking your deferred state pension until the end of March 2025 if you're worried (or optimistic, depending on your viewpoint!).

ColdIron said:

Bettie said:

You pay tax on the full amount if you go into the 20% tax band 
The lump sum will be 90000 ish

No you don't and where did this lump sum come from?

You only pay tax on the pension sums that exceed the £12,570 Personal Allowance and then you have couple of 0% tax bands (the £5,000 Starting Rate for Savings and the £1,000 Personal Savings Allowance) to protect your savings interest

With pension and savings within these bands you may pay no tax whatsoever. If you exceed one or both you only pay tax on the part(s) that exceed those threshold(s) not the 'full amount'

OP is correct. The tax treatment of deferred state pension (for those who deferred at a time when taking it as a lump sum was still an option) is in its own little world. See https://www.litrg.org.uk/pensions/state-pension/tax-state-pension/tax-deferred-state-pension-lump-sums#:~:text=The%20deferred%20state%20pension%20lump,to%20tax%20the%20lump%20sum.

I think delaying until after any Waspi news  is a good idea. I can always take the lump sum the following tax year. Would have to get the maths right though as I may have too much interest on savings that year with a state pension coming in as well. 

Andy_L

Bettie said:

You pay tax on the full amount if you go into the 20% tax band 
The lump sum will be 90000 ish 

I see the confusion. I would not class £90k as "a few thousand"

Marcon

Bettie said:

molerat said:

Bettie said:

My deferred pension lump sum will be about 90000. My question is will compensation affect the tax position. I read this week the Waspi stuff will be reviewed in December 2024. The last thing I want is compensation in that tax year if it affects a deferred pension 

Ah, so you are saying your deferred SP lump sum will be £90K and not taxed due to you receiving less than you tax free allowance from other income.  I suspect any "compensation" would be taxable income so you are going to have to gamble on that not happening if you are intent on taking the lump sum in the 24-25 tax year although the chances of compensation are minute and of that being paid in the 24-25 tax year even smaller.

Thanks for understanding.  I know it's a small chance. Its a lot of money to pay in tax just to go over that band by £1   

Making a charitable donation using Gift Aid might solve that problem?

Bettie

Andy_L said:

Bettie said:

You pay tax on the full amount if you go into the 20% tax band 
The lump sum will be 90000 ish 

I see the confusion. I would not class £90k as "a few thousand"

That was a reference to possible Waspie pay out not  the £90000 or thereabouts that I've not picked up in state pension . 
Being in this forum has made me aware of every penny saved . 
Just hoping I don't die before claiming as I ..or my family..would lose the lot. 

Bettie

Marcon said:

Bettie said:

molerat said:

Bettie said:

My deferred pension lump sum will be about 90000. My question is will compensation affect the tax position. I read this week the Waspi stuff will be reviewed in December 2024. The last thing I want is compensation in that tax year if it affects a deferred pension 

Ah, so you are saying your deferred SP lump sum will be £90K and not taxed due to you receiving less than you tax free allowance from other income.  I suspect any "compensation" would be taxable income so you are going to have to gamble on that not happening if you are intent on taking the lump sum in the 24-25 tax year although the chances of compensation are minute and of that being paid in the 24-25 tax year even smaller.

Thanks for understanding.  I know it's a small chance. Its a lot of money to pay in tax just to go over that band by £1   

Making a charitable donation using Gift Aid might solve that problem?

Good option .