The taxation of pension income: pension payments made in arrears

Taylor2000

If someone has deferrred their occupational pension from age 60 to SPA (age 67) and then receives a large backdated lump sum of pension payment arrears can they have those payments attributed back to relevant tax years (so as not to face higher rate liability). I am looking at https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim75020 and wondering if a person could take advantage of this or or would this only apply "If a pension provider discovers a long-standing underpayment of pension, ..." as stated in the section about pension paid in arrears.

Ayr_Rage

If it is not a tax free lump sum then the whole amount is counted as income in the year in which it is paid.

Taylor2000

Ayr_Rage said:

If it is not a tax free lump sum then the whole amount is counted as income in the year in which it is paid.

Thank you for your reply. 

I've just found this advice given by @xylophone.  https://forums.moneysavingexpert.com/discussion/6113696/back-dated-payments-from-a-lost-pension-can-these-typically-be-ascribed-to-2-tax-years 

I'm totally confused? 

flaneurs_lobster

Not sure why you are confused. 

The examples quoted in the posts above relate to amounts of pension which were discovered some years after they should have been paid, and describe that application may be made to HMRC to have them assessed as if paid over the period of arrears to avoid a higher rate of taxation. These were not deferred pensions.

The situation you describe is of someone deferring their pension at their own instigation. One consequence of this is that if they then take a lump sum payment (over any TFLS) then they may be subject to a higher rate of tax in the year that they take a payment.

eskbanker

There's a difference between choosing to defer and being underpaid involuntarily....