Royal Mail Pension Benefits

Ferboz

Hello, I am hoping i can get a little clarity on pension options
I am due to receive  a retirement pension in July this year, when i am 60. I no longer work at Royal Mail.
I have 4 options. 

1. a full pension amount PA
2. a reduced amount plus lump sum
3. a full pension and an AVC amount
4. a reduced amount plus maximum lump sum ( which is the AVC amount plus the PCLS)

What i am struggling with is, once i decide on which option to take, my pension is payable under PAYE procedures. ( i seem to remember being told that RM deduct tax rather than me paying an amount in January). I understand this in a way, but as I will still be working i am wondering what this means regarding taxable income. It does say that HMRC will be notified of this retirement date and if any alteration is necessary, RM ( or Capita) will adjust accordingly. So does this mean, i will get taxed on my RM pension and a higher tax on my current employment... or will HMRC amalgamate the tax payable on one of my payments each month? 
Finally, after reading about the Lifetime Allowance, I am thoroughly confused, so if anyone can give me any help on that too, i will appreciate that!
Thankyou

dunstonh

What i am struggling with is, once i decide on which option to take, my pension is payable under PAYE procedures.

All pensions are PAYE.   You get payslips and a P60 just like employed income (although payslips are beginning to be phased out or limited to only when there is change in amount).  

I understand this in a way, but as I will still be working i am wondering what this means regarding taxable income.
<snip>
So does this mean, i will get taxed on my RM pension and a higher tax on my current employment... or will HMRC amalgamate the tax payable on one of my payments each month? 

The first payment will be on emergency tax (or month 1 tax as its often referred to nowadays).   HMRC will be contacted and they will then tell the pension provider what tax code to use.      Typically, HMRC apply your personal allowance to your highest income and any secondary income is at basic rate to higher rate as applicable.     However, sometimes, because of the amounts involved, they may use different tax codes to even it out.

Finally, after reading about the Lifetime Allowance, I am thoroughly confused, so if anyone can give me any help on that too, i will appreciate that!

One could write hundreds of thousands of words on the LTA.   So, it would help if you could narrow down what in particular you are confused about and we can focus on that.  Alternatively, if you google Lifetime allowance, you will can read an awful lot about the LTA.

xylophone

You will be earning a salary and  receiving a pension.

Is your salary higher than your personal allowance?

If so, presumably all that will happen is that the  tax code on your pension (supplied to Capita by HMRC) will reflect the fact that all your allowances are given against your salary.

For example, if your only taxable income salary were £30,000 a year and your pension  £15,000 a year, the code on the pension would likely be  BR as you would pay 20% tax on the whole of the pension.

If your  salary were £50,000 a year and your pension £20,000 a year, an adjustment would need to be made to the tax code on the pension as here

https://www.gov.uk/employee-tax-codes/letters

My relative retired from his work place of nearly forty years at almost 60 and took his DB pension. He then worked full time elsewhere for  around three years - he says that he thinks he had a K code.

Marcon

Ferboz said:

Finally, after reading about the Lifetime Allowance, I am thoroughly confused, so if anyone can give me any help on that too, i will appreciate that!
Thankyou

Looking at some of your previous posts, especially this one: https://forums.moneysavingexpert.com/discussion/6327603/avc-pension-advice#latest I don't think you need to worry about the LTA unless you've suddenly built up a massive pension and are worried that you can 'only' take about a quarter of a million quid as the tax free lump sum...