Salary Sacrifice after taking state pension

Dazed_and_C0nfused

NotTightJustCareful said:

 Dazed_and_C0nfused said:

NotTightJustCareful said:

I used the national minimum wage in my calculation. I know I can pay further pension contribution by relief at source and the pension company will reclaim tax paid back. They wouldn't be any difference in Tax because I won't be paying NI after 66. The problem is that the starting rate for savers is calculated on net pay , right ?

No, it's determined by how much non savings non dividend income you have and the amount of your Personal Allowance.

But you are correct that making relief at source contributions won't help as they don't reduce your taxable income.

You can end up in the (relatively) unusual position of effectively being charged 40% tax despite your actual income being nowhere near the higher rate threshold.

If you do defer State Pension remember it's your entitlement in the tax year which counts, not what you actually receive.

 I realise that starting rate for savers will be based  on my net pay + state pension. Hence why I was trying to reduce the amount of state pension by deferring it. But if its down to entitlement and not actual pension then I have no way to reduce my savings tax.

By entitlement I mean the amount you are entitled to receive once you claim your State Pension.  Which would be an increased amount (from deferring) for a shorter period (due to deferring).

Some people think State Pension is based on what you receive but it isn't.  So say after deferring you are entitled to £240/week.  Payable for 16 weeks of the tax year you start it in.  Your taxable amount is £240 x 16.  The fact DWP may pay you a slightly different amount within that tax year is irrelevant.

Also, I don't know why you mean by net pay but that is not something that is relevant for tax purposes.  Your taxable pay is what counts, your net pay (sometimes called take home pay) is of no relevance when calculating the available savings starter rate band.

Overall I think you are somehow making this much more complicated than it actually is.

NotTightJustCareful

400ixl said:

Maybe put your non ISA savings that will generate a tax liability in Premium Bonds for a year. Who knows, you may have better than average luck and get a decent return.

I can't as they are in fixed rate term bonds. I have several bonds that will mature each year till 2028. The only problem is that I have decided to work an extra year and therefore will have a state pension and a salary. I will be subsequently be living off the capital and interest of the maturing bonds and my state pension possibly topping up a little from my DC pension.

Zeyfur2021

Unfortunately, you cannot salary sacrifice below minimum wage. 

crv1963

NotTightJustCareful said:

TheSpectator said:

As above you cannot salary sacrifice below minimum wage Is is really the end of the world if you pay £300 odd tax? Deferring state pension to save £300 seems a bit extreme. Makes sense to defer if you are higher rate.

   Fair point , I was wanting an extra reason to defer my state pension. I like the idea of small annuity to boost my basic pension to cover my basic needs. I have a small NHS DB pension that I have yet to take and that with the increased state pension would cover my basic needs. I will be drawing down my DC pension as I require extra to live upon.

Which NHS Scheme is this in? 1995 scheme has pensionable age 60 years old and 2008 scheme 65 years old. Deferring taking the NHS Scheme doesn't increase them it is simply money lost. I don't know how you define small but I suspect you have already lost more than you are trying to save? 

Marcon

crv1963 said:

NotTightJustCareful said:

TheSpectator said:

As above you cannot salary sacrifice below minimum wage Is is really the end of the world if you pay £300 odd tax? Deferring state pension to save £300 seems a bit extreme. Makes sense to defer if you are higher rate.

   Fair point , I was wanting an extra reason to defer my state pension. I like the idea of small annuity to boost my basic pension to cover my basic needs. I have a small NHS DB pension that I have yet to take and that with the increased state pension would cover my basic needs. I will be drawing down my DC pension as I require extra to live upon.

Which NHS Scheme is this in? 1995 scheme has pensionable age 60 years old and 2008 scheme 65 years old. Deferring taking the NHS Scheme doesn't increase them it is simply money lost. I don't know how you define small but I suspect you have already lost more than you are trying to save? 

Indeed. OP, please have a look at https://forums.moneysavingexpert.com/discussion/6568035/nhs-1995-pension-doesnt-grow-after-60/p1

There's a danger you could be scrabbling for ways to save a few pounds in tax, but losing NHS pension payments (permanently) in the process, depending on which NHS scheme you are in.

NotTightJustCareful

Marcon said:

crv1963 said:

NotTightJustCareful said:

TheSpectator said:

As above you cannot salary sacrifice below minimum wage Is is really the end of the world if you pay £300 odd tax? Deferring state pension to save £300 seems a bit extreme. Makes sense to defer if you are higher rate.

   Fair point , I was wanting an extra reason to defer my state pension. I like the idea of small annuity to boost my basic pension to cover my basic needs. I have a small NHS DB pension that I have yet to take and that with the increased state pension would cover my basic needs. I will be drawing down my DC pension as I require extra to live upon.

Which NHS Scheme is this in? 1995 scheme has pensionable age 60 years old and 2008 scheme 65 years old. Deferring taking the NHS Scheme doesn't increase them it is simply money lost. I don't know how you define small but I suspect you have already lost more than you are trying to save? 

Indeed. OP, please have a look at https://forums.moneysavingexpert.com/discussion/6568035/nhs-1995-pension-doesnt-grow-after-60/p1

There's a danger you could be scrabbling for ways to save a few pounds in tax, but losing NHS pension payments (permanently) in the process, depending on which NHS scheme you are in.

I was in the 1995 scheme. I have a very small pension £550 per year. I assumed that it will grow by inflation until i take it probably at 67 when I actually retire.  You are not saying i will lose all the back years completed are you? I don't I want to take the accrued NHS pension (which works out at £4.5K with lump sum) this year as it will mean I will lose the starting rate for savers interest and I would have to pay £400 in tax on non ISA interest. When I am 67 I plan to have most of my savings in an ISA wrapper so the problem is adverted.

Sarahspangles

NotTightJustCareful said:

Marcon said:

crv1963 said:

NotTightJustCareful said:

TheSpectator said:

As above you cannot salary sacrifice below minimum wage Is is really the end of the world if you pay £300 odd tax? Deferring state pension to save £300 seems a bit extreme. Makes sense to defer if you are higher rate.

   Fair point , I was wanting an extra reason to defer my state pension. I like the idea of small annuity to boost my basic pension to cover my basic needs. I have a small NHS DB pension that I have yet to take and that with the increased state pension would cover my basic needs. I will be drawing down my DC pension as I require extra to live upon.

Which NHS Scheme is this in? 1995 scheme has pensionable age 60 years old and 2008 scheme 65 years old. Deferring taking the NHS Scheme doesn't increase them it is simply money lost. I don't know how you define small but I suspect you have already lost more than you are trying to save? 

Indeed. OP, please have a look at https://forums.moneysavingexpert.com/discussion/6568035/nhs-1995-pension-doesnt-grow-after-60/p1

There's a danger you could be scrabbling for ways to save a few pounds in tax, but losing NHS pension payments (permanently) in the process, depending on which NHS scheme you are in.

I was in the 1995 scheme. I have a very small pension £550 per year. I assumed that it will grow by inflation until i take it probably at 67 when I actually retire.  You are not saying i will lose all the back years completed are you? I don't I want to take the accrued NHS pension (which works out at £4.5K with lump sum) this year as it will mean I will lose the starting rate for savers interest and I would have to pay £400 in tax on non ISA interest. When I am 67 I plan to have most of my savings in an ISA wrapper so the problem is adverted.

My understanding is that if this pension is ‘unlinked’ (no longer working in the NHS, or had a break of 5 years) you’ll get CPI increases only, you won’t receive more by deferring and you’ll lose the 7 years of pension payments.

The ‘Retire and Return’ rules for current NHS employees had to be introduced to allow people to claim their 1995 benefits and keep working past 60. 

NotTightJustCareful

Sarahspangles said:

NotTightJustCareful said:

Marcon said:

crv1963 said:

NotTightJustCareful said:

TheSpectator said:

As above you cannot salary sacrifice below minimum wage Is is really the end of the world if you pay £300 odd tax? Deferring state pension to save £300 seems a bit extreme. Makes sense to defer if you are higher rate.

   Fair point , I was wanting an extra reason to defer my state pension. I like the idea of small annuity to boost my basic pension to cover my basic needs. I have a small NHS DB pension that I have yet to take and that with the increased state pension would cover my basic needs. I will be drawing down my DC pension as I require extra to live upon.

Which NHS Scheme is this in? 1995 scheme has pensionable age 60 years old and 2008 scheme 65 years old. Deferring taking the NHS Scheme doesn't increase them it is simply money lost. I don't know how you define small but I suspect you have already lost more than you are trying to save? 

Indeed. OP, please have a look at https://forums.moneysavingexpert.com/discussion/6568035/nhs-1995-pension-doesnt-grow-after-60/p1

There's a danger you could be scrabbling for ways to save a few pounds in tax, but losing NHS pension payments (permanently) in the process, depending on which NHS scheme you are in.

I was in the 1995 scheme. I have a very small pension £550 per year. I assumed that it will grow by inflation until i take it probably at 67 when I actually retire.  You are not saying i will lose all the back years completed are you? I don't I want to take the accrued NHS pension (which works out at £4.5K with lump sum) this year as it will mean I will lose the starting rate for savers interest and I would have to pay £400 in tax on non ISA interest. When I am 67 I plan to have most of my savings in an ISA wrapper so the problem is adverted.

My understanding is that if this pension is ‘unlinked’ (no longer working in the NHS, or had a break of 5 years) you’ll get CPI increases only, you won’t receive more by deferring and you’ll lose the 7 years of pension payments.

The ‘Retire and Return’ rules for current NHS employees had to be introduced to allow people to claim their 1995 benefits and keep working past 60. 

So you saying I will lose all the pension owing to me because i didn't claim it when I was 60 ? Seems incredibly unfair and not what told to me when I inquired with the NHS pension office. I shall contact them to clarify again.

Sarahspangles

NotTightJustCareful said:

Sarahspangles said:

NotTightJustCareful said:

Marcon said:

crv1963 said:

NotTightJustCareful said:

TheSpectator said:

As above you cannot salary sacrifice below minimum wage Is is really the end of the world if you pay £300 odd tax? Deferring state pension to save £300 seems a bit extreme. Makes sense to defer if you are higher rate.

   Fair point , I was wanting an extra reason to defer my state pension. I like the idea of small annuity to boost my basic pension to cover my basic needs. I have a small NHS DB pension that I have yet to take and that with the increased state pension would cover my basic needs. I will be drawing down my DC pension as I require extra to live upon.

Which NHS Scheme is this in? 1995 scheme has pensionable age 60 years old and 2008 scheme 65 years old. Deferring taking the NHS Scheme doesn't increase them it is simply money lost. I don't know how you define small but I suspect you have already lost more than you are trying to save? 

Indeed. OP, please have a look at https://forums.moneysavingexpert.com/discussion/6568035/nhs-1995-pension-doesnt-grow-after-60/p1

There's a danger you could be scrabbling for ways to save a few pounds in tax, but losing NHS pension payments (permanently) in the process, depending on which NHS scheme you are in.

I was in the 1995 scheme. I have a very small pension £550 per year. I assumed that it will grow by inflation until i take it probably at 67 when I actually retire.  You are not saying i will lose all the back years completed are you? I don't I want to take the accrued NHS pension (which works out at £4.5K with lump sum) this year as it will mean I will lose the starting rate for savers interest and I would have to pay £400 in tax on non ISA interest. When I am 67 I plan to have most of my savings in an ISA wrapper so the problem is adverted.

My understanding is that if this pension is ‘unlinked’ (no longer working in the NHS, or had a break of 5 years) you’ll get CPI increases only, you won’t receive more by deferring and you’ll lose the 7 years of pension payments.

The ‘Retire and Return’ rules for current NHS employees had to be introduced to allow people to claim their 1995 benefits and keep working past 60. 

So you saying I will lose all the pension owing to me because i didn't claim it when I was 60 ? Seems incredibly unfair and not what told to me when I inquired with the NHS pension office. I shall contact them to clarify again.

Definitely check - there are so many permutations!

crv1963

NotTightJustCareful said:

Sarahspangles said:

NotTightJustCareful said:

Marcon said:

crv1963 said:

NotTightJustCareful said:

TheSpectator said:

As above you cannot salary sacrifice below minimum wage Is is really the end of the world if you pay £300 odd tax? Deferring state pension to save £300 seems a bit extreme. Makes sense to defer if you are higher rate.

   Fair point , I was wanting an extra reason to defer my state pension. I like the idea of small annuity to boost my basic pension to cover my basic needs. I have a small NHS DB pension that I have yet to take and that with the increased state pension would cover my basic needs. I will be drawing down my DC pension as I require extra to live upon.

Which NHS Scheme is this in? 1995 scheme has pensionable age 60 years old and 2008 scheme 65 years old. Deferring taking the NHS Scheme doesn't increase them it is simply money lost. I don't know how you define small but I suspect you have already lost more than you are trying to save? 

Indeed. OP, please have a look at https://forums.moneysavingexpert.com/discussion/6568035/nhs-1995-pension-doesnt-grow-after-60/p1

There's a danger you could be scrabbling for ways to save a few pounds in tax, but losing NHS pension payments (permanently) in the process, depending on which NHS scheme you are in.

I was in the 1995 scheme. I have a very small pension £550 per year. I assumed that it will grow by inflation until i take it probably at 67 when I actually retire.  You are not saying i will lose all the back years completed are you? I don't I want to take the accrued NHS pension (which works out at £4.5K with lump sum) this year as it will mean I will lose the starting rate for savers interest and I would have to pay £400 in tax on non ISA interest. When I am 67 I plan to have most of my savings in an ISA wrapper so the problem is adverted.

My understanding is that if this pension is ‘unlinked’ (no longer working in the NHS, or had a break of 5 years) you’ll get CPI increases only, you won’t receive more by deferring and you’ll lose the 7 years of pension payments.

The ‘Retire and Return’ rules for current NHS employees had to be introduced to allow people to claim their 1995 benefits and keep working past 60. 

So you saying I will lose all the pension owing to me because i didn't claim it when I was 60 ? Seems incredibly unfair and not what told to me when I inquired with the NHS pension office. I shall contact them to clarify again.

Yes you have lost £550 multiplied by however many years that you are over 60. There is no backdating. It will have increased by CPI only. Deferring does not increase the pension size.