Paying from one pension into another - tax etc

Delacorta

Hi all

This may be a very naive question.

My wife turned 60 last year and her Civil Service Classic pension came into payment.  She is still working, but not for the Civil Service.  She paid the lump sum into an ISA and the monthly pension payments into her Nest pension.

She had thought the Classic pension is paid net, but she received her P60 on Fiday and she's not paid any tax on the pension.  I guess this will be taken into account with a new tax code, paying what's owed in arrears?

That would be fine but we just checked and the payments into NEST haven't attracted the tax relief either.  Does she need to do anything to activate this once she is paying tax on the income? hopefully it ll nets out in the end.

I hope this makes sense, thanks in advance.

dunstonh

That would be fine but we just checked and the payments into NEST haven't attracted the tax relief either.  Does she need to do anything to activate this once she is paying tax on the income? hopefully it ll nets out in the end.

Nest is primarily an auto-enrolment scheme (that is what it was set up for despite some mission creep).   So, are these contributions being made as employer contributions (where there is no relief at source) or employee contributions or is she using salary sacrifice where the whole contribution (employer and employee) is classed as an employer contribution?

Marcon

dunstonh said:

That would be fine but we just checked and the payments into NEST haven't attracted the tax relief either.  Does she need to do anything to activate this once she is paying tax on the income? hopefully it ll nets out in the end.

Nest is primarily an auto-enrolment scheme (that is what it was set up for despite some mission creep).   So, are these contributions being made as employer contributions (where there is no relief at source) or employee contributions or is she using salary sacrifice where the whole contribution (employer and employee) is classed as an employer contribution?

Looking at OP's previous thread https://forums.moneysavingexpert.com/discussion/6393272/married-and-recycling/p2 there seems to be quite a bit of confusion!

Delacorta

dunstonh said:

That would be fine but we just checked and the payments into NEST haven't attracted the tax relief either.  Does she need to do anything to activate this once she is paying tax on the income? hopefully it ll nets out in the end.

Nest is primarily an auto-enrolment scheme (that is what it was set up for despite some mission creep).   So, are these contributions being made as employer contributions (where there is no relief at source) or employee contributions or is she using salary sacrifice where the whole contribution (employer and employee) is classed as an employer contribution?

Employee contributions.  No salary sacrifice.  Apologies for the confusion - it is the first time either of us has been a 'pensioner' so the reality is new to us.

Albermarle

Delacorta said:

Hi all

This may be a very naive question.

My wife turned 60 last year and her Civil Service Classic pension came into payment.  She is still working, but not for the Civil Service.  She paid the lump sum into an ISA and the monthly pension payments into her Nest pension.

She had thought the Classic pension is paid net, but she received her P60 on Fiday and she's not paid any tax on the pension.  I guess this will be taken into account with a new tax code, paying what's owed in arrears?

That would be fine but we just checked and the payments into NEST haven't attracted the tax relief either.  Does she need to do anything to activate this once she is paying tax on the income? hopefully it ll nets out in the end.

I hope this makes sense, thanks in advance.

Firstly be clear that that the tax you pay on income and the tax releif you get on pension contributions ae not directly related.
So there seems to be two separate issues here.

1) Normally you would expect her to be paying some tax on the Classic pension, so not sure why she is not. Probably a good idea to contact them, and/or check her personal tax account on line to try as see what is happening.
2) Nest should add basic rate tax relief automatically on all personal contributions without you/her doing anything.  However there will be a delay in adding the tax relief as Nest claim it from HMRC . The delay can be up to 10 ? weeks. 

Delacorta

Albermarle said:

Delacorta said:

Hi all

This may be a very naive question.

My wife turned 60 last year and her Civil Service Classic pension came into payment.  She is still working, but not for the Civil Service.  She paid the lump sum into an ISA and the monthly pension payments into her Nest pension.

She had thought the Classic pension is paid net, but she received her P60 on Fiday and she's not paid any tax on the pension.  I guess this will be taken into account with a new tax code, paying what's owed in arrears?

That would be fine but we just checked and the payments into NEST haven't attracted the tax relief either.  Does she need to do anything to activate this once she is paying tax on the income? hopefully it ll nets out in the end.

I hope this makes sense, thanks in advance.

Firstly be clear that that the tax you pay on income and the tax releif you get on pension contributions ae not directly related.
So there seems to be two separate issues here.

1) Normally you would expect her to be paying some tax on the Classic pension, so not sure why she is not. Probably a good idea to contact them, and/or check her personal tax account on line to try as see what is happening.
2) Nest should add basic rate tax relief automatically on all personal contributions without you/her doing anything.  However there will be a delay in adding the tax relief as Nest claim it from HMRC . The delay can be up to 10 ? weeks. 

Thanks for this. I've just logged into her Nest and the tax relief is indeed in there.  Apologies for the confusion.  I'll suggest to her that she speak to HMRC about why they've not taken tax on the Classic as I thought that was the way Classic works.  Hopefuly a simple repayment through tax code to get her up to date.  

Thanks all!

Albermarle

Delacorta said:

Albermarle said:

Delacorta said:

Hi all

This may be a very naive question.

My wife turned 60 last year and her Civil Service Classic pension came into payment.  She is still working, but not for the Civil Service.  She paid the lump sum into an ISA and the monthly pension payments into her Nest pension.

She had thought the Classic pension is paid net, but she received her P60 on Fiday and she's not paid any tax on the pension.  I guess this will be taken into account with a new tax code, paying what's owed in arrears?

That would be fine but we just checked and the payments into NEST haven't attracted the tax relief either.  Does she need to do anything to activate this once she is paying tax on the income? hopefully it ll nets out in the end.

I hope this makes sense, thanks in advance.

Firstly be clear that that the tax you pay on income and the tax releif you get on pension contributions ae not directly related.
So there seems to be two separate issues here.

1) Normally you would expect her to be paying some tax on the Classic pension, so not sure why she is not. Probably a good idea to contact them, and/or check her personal tax account on line to try as see what is happening.
2) Nest should add basic rate tax relief automatically on all personal contributions without you/her doing anything.  However there will be a delay in adding the tax relief as Nest claim it from HMRC . The delay can be up to 10 ? weeks. 

Thanks for this. I've just logged into her Nest and the tax relief is indeed in there.  Apologies for the confusion.  I'll suggest to her that she speak to HMRC about why they've not taken tax on the Classic as I thought that was the way Classic works.  Hopefuly a simple repayment through tax code to get her up to date.  

Thanks all!

Good that the Nest part is cleared up.

For the other .
She seems to have two sources of taxable income. Her current job and the Classic pension.
Her tax liability is calculated by simply adding the two together , subtracting her personal allowance ( normally £12570 ) and then pay 20% tax on the rest ( assuming she is not getting enough income to pay 40% tax).
Towards the end of the Summer an automatic tax calculation for the tax year will be made by HMRC and she will be informed if she owes any tax.
It is possible though she has been paying more tax on her employment income and none on her pension

However ideally of course she should be paying the right amount of tax each month, so no surprises. Sometimes when you have two sources of income HMRC do not allocate the tax codes very well and you need to contact them to sort it out.

jem16

Delacorta said:

JAlbermarle said:

Delacorta said:

Hi all

This may be a very naive question.

My wife turned 60 last year and her Civil Service Classic pension came into payment.  She is still working, but not for the Civil Service.  She paid the lump sum into an ISA and the monthly pension payments into her Nest pension.

She had thought the Classic pension is paid net, but she received her P60 on Fiday and she's not paid any tax on the pension.  I guess this will be taken into account with a new tax code, paying what's owed in arrears?

That would be fine but we just checked and the payments into NEST haven't attracted the tax relief either.  Does she need to do anything to activate this once she is paying tax on the income? hopefully it ll nets out in the end.

I hope this makes sense, thanks in advance.

Firstly be clear that that the tax you pay on income and the tax releif you get on pension contributions ae not directly related.
So there seems to be two separate issues here.

1) Normally you would expect her to be paying some tax on the Classic pension, so not sure why she is not. Probably a good idea to contact them, and/or check her personal tax account on line to try as see what is happening.
2) Nest should add basic rate tax relief automatically on all personal contributions without you/her doing anything.  However there will be a delay in adding the tax relief as Nest claim it from HMRC . The delay can be up to 10 ? weeks. 

I'll suggest to her that she speak to HMRC about why they've not taken tax on the Classic as I thought that was the way Classic works.  Hopefuly a simple repayment through tax code to get her up to date.  

Thanks all!

What tax codes are being used on her employment and her pension?