Retired with tax code of SK546?

eastcorkram

Dazed_and_C0nfused said:

eastcorkram said:

Dazed_and_C0nfused said:

eastcorkram said:

Marcon said:

eastcorkram said:

@Marcon

If the amount of tax due , is more than 50% of whatever you're being paid (let's say a DB pension), then how is the balance collected? Would you just get sent a tax bill?

As you'd expect, there isn't a nice simple 'yes that's' right...' answer!

See https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye11095

Wow. Thanks for that (I think !)

I'll have over 20k in untaxed state pension(s). Then there's a DB that will be between 4 and 5k . Then there is a SIPP which I was going to draw, also at about 4 or 5k a year. 

The tax side of it will be interesting. 

Not sure how you can have more than one State Pension 🤔

But if you did have State Pension of say £21k and no extra tax code allowances or deductions then you would have a tax code of K842 with whatever HMRC view as your "main" pension (not necessarily the largest in monetary terms) and BR code at the other one.

Say each pension was paying £4,500 then you would pay 50% on the main one and 20% on the second one.

After the end of the tax year HMRC would send you a Simple Assessment calculation and you would have to pay the remaining tax due (~£335 in the above example) by 31 January after the end of the tax year.

State pensions from two countries.

Thanks for the explanation. Would there still be 25% of each SIPP withdrawal tax free? Or would it all be taxed at 20%…?

No reason not to take the TFLS.

If you have significant foreign income HMRC are quite likely to prefer you to complete a tax return.

Which has the distinct advantage of meaning you could pay less under PAYE and a larger payment direct to HMRC several months after the end of the tax year.

I will need to make a decision about TFLS at the end of this year. I'd like about 20k, basically to live on, until SP starts about 10 months later 

The DB has an option of £18,800 lump sum, or no lump sum, but pension £750 more per year, or something like that. So I could use that, OR take the higher pension, and take the 20k tax free from the SIPP. 

I'm not sure which is the right thing to do. I could take both of course, but pretty sure that's not a good idea. 

Sarahspangles

eastcorkram said:

I will need to make a decision about TFLS at the end of this year. I'd like about 20k, basically to live on, until SP starts about 10 months later The DB has an option of £18,800 lump sum, or no lump sum, but pension £750 more per year, or something like that. So I could use that, OR take the higher pension, and take the 20k tax free from the SIPP. 

I'm not sure which is the right thing to do. I could take both of course, but pretty sure that's not a good idea. 

Do you know what the DB commutation rate is? That’s how many ££ you get for each £ pension you commute to a lump sum. The ratio will be something like 1:18 (good) or 1:12 [not so good) 

Qyburn

eastcorkram said:

Would there still be 25% of each SIPP withdrawal tax free?

Yes. Tax free cash from the SIPP is inherently tax free, doesn't play any part in your tax calculations and isn't affected by any other tax liabilities. 

eastcorkram

Sarahspangles said:

eastcorkram said:

I will need to make a decision about TFLS at the end of this year. I'd like about 20k, basically to live on, until SP starts about 10 months later The DB has an option of £18,800 lump sum, or no lump sum, but pension £750 more per year, or something like that. So I could use that, OR take the higher pension, and take the 20k tax free from the SIPP. 

I'm not sure which is the right thing to do. I could take both of course, but pretty sure that's not a good idea. 

Do you know what the DB commutation rate is? That’s how many ££ you get for each £ pension you commute to a lump sum. The ratio will be something like 1:18 (good) or 1:12 [not so good) 

Is that simply based on the relationship between the two figures?

The pension has an age of 65, which is later this year for me. 

This has a PCLS of £18,868, or if I don't take that, the pension is £804 a year higher. Does that mean the rate is well over 20? 

Albermarle

eastcorkram said:

Sarahspangles said:

eastcorkram said:

I will need to make a decision about TFLS at the end of this year. I'd like about 20k, basically to live on, until SP starts about 10 months later The DB has an option of £18,800 lump sum, or no lump sum, but pension £750 more per year, or something like that. So I could use that, OR take the higher pension, and take the 20k tax free from the SIPP. 

I'm not sure which is the right thing to do. I could take both of course, but pretty sure that's not a good idea. 

Do you know what the DB commutation rate is? That’s how many ££ you get for each £ pension you commute to a lump sum. The ratio will be something like 1:18 (good) or 1:12 [not so good) 

Is that simply based on the relationship between the two figures?

The pension has an age of 65, which is later this year for me. 

This has a PCLS of £18,868, or if I don't take that, the pension is £804 a year higher. Does that mean the rate is well over 20? 

On the face of it a commutation rate of over 23 is pretty good. The higher the figure the more attractive it is to take the lump sum. However-
If the pension has very generous conditions, such as a full link to inflation, then this might be the reason the commutation rate is on the higher side.
Also if you personally are 'short' of guaranteed income, and/or you have no real need of the lump sum, you may wish to keep the full pension anyway.

Sarahspangles

Thanks @Albermarle I was about to do maths

Marcon

Sarahspangles said:

eastcorkram said:

I will need to make a decision about TFLS at the end of this year. I'd like about 20k, basically to live on, until SP starts about 10 months later The DB has an option of £18,800 lump sum, or no lump sum, but pension £750 more per year, or something like that. So I could use that, OR take the higher pension, and take the 20k tax free from the SIPP. 

I'm not sure which is the right thing to do. I could take both of course, but pretty sure that's not a good idea. 

Do you know what the DB commutation rate is? That’s how many ££ you get for each £ pension you commute to a lump sum. The ratio will be something like 1:18 (good) or 1:12 [not so good) 

You need to take your age into consideration when looking at commutation rates - if you're 55 1:18 isn't great, if you're 70 it's rather good!