State and private pensions have gone up, but I'm worse off

Marcon

https://forums.moneysavingexpert.com/discussion/comment/81973613#Comment_81973613

If your state pension has risen £11 a month, that's £132 a year (or more likely £143, since state pensions are paid every four weeks, never monthly), unless you opt to have them paid weekly or fortnightly. Basic rate tax on £143 at 20% is £28.60, so the arithmetic is hopelessly adrift somewhere.

I checked with HMRC and they say this will happen every month and admitted I will be worse off and there's nothing anyone can do about it. They have been inundated with queries on the subject. I asked if I could simply opt out of the £11 increase and go back to the previous arrangement and they didn't know. Really!

You can't opt out of the £11 increase and 'go back to the previous arrangement' - nor should you see it as a good idea.

See if https://www.saga.co.uk/money-news/state-pension-tax-shock?srsltid=AfmBOopT--z7hL3CSzWzvU1ghAghitR4DBjAmJgIAUhbq63bNsV8SgDc#:~:text=If%20you%20are%20still%20working,save%20you%20hundreds%20of%20pounds.%E2%80%9D helps you to understand what's going on, or https://www.litrg.org.uk/pensions/state-pension/tax-state-pension/how-tax-collected-state-pension#3

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/81973730#Comment_81973730

If you're on the full NSP, as implied by £921 in 2025/26 then you'll now be on £965 per 4 weeks after the initial transitional period straddling both years.

If you share income and coding figures for each annuity then I'm sure someone can clarify in more detail, although chances are it'll sort itself out…

Obviously you're not the only one to want a good vent about frozen allowances but as above, that's old news and doesn't really get anyone anywhere in any case!

molerat

Taking April stand alone and out of context from the overall year is never a good idea.

My increased main pension net payment this month is actually less than March due to 3 colliding factors - April never receives a full increase and the increased state pension deduction from my coding along with a change of coding allocation giving a double whammy lower code - the conspiracy theorists would have a field day with that one !

I do though understand exactly what has happened and one of my other pensions will see an additional increase from that code allocation and over the year I will be the expected amount better off.

Qyburn

https://forums.moneysavingexpert.com/discussion/comment/81973613#Comment_81973613

If your SP actuactually increased by £11/month, and that takes you right up to the personal allowance, then that means last year you only had £11/month personal allowance available.

In turn this means that last year your private pension would have had £11/month tax free, and the rest taxed.

This year, as a result of that £11/month rise in SP, your private pension would all be taxed, including the first £11. Additional tax of £2.20, leaving you £8.80 better off.

Whatkindoflife

https://forums.moneysavingexpert.com/discussion/comment/81973729#Comment_81973729

To be clear Rachel Reeves extended the freeze for a further three years at Budget 2025 turning what began as an unwelcome, but perhaps not unexpected, post-pandemic tax rise into a ten-year freeze that will leave thresholds unchanged from April 6 2021 to April 5 2031. This is a revenue boosting strategy aimed at hitting 'rich' pensioners.

Thanks for all the input on this. I hope that the general feeling that my first payments and new tax burden are a reflection of a one-off initial payment oddity is actually true. What us unforgivable is that HMRC must be aware of the potential confusion surrounding these changes but does little to explain or advise people of these problems.

I will update when I get my next payments. I did contact HMRC and wait 30 mins for customer service to respond, only to be told they couldn't answer all my queries and I should call the pensions helpline. The number provided turned out to be for Funerals On A Budget, which makes this pensioner feel somewhat superfluous.

QrizB

I will update when I get my next payments.

If you can share the annual payments and tax paid from all your pensions and other income, for 2025/26 and 2026/27, we can help you calculate your total tax liability and understand what's changed.

For example, it's possible that you were under taxes last year and there's an element of catch-up in your new tax codes.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81974105#Comment_81974105

Maybe the op is having to pay their Winter Fuel payment back and that is adding to the extra tax being deducted?

molerat

If you are on the full new state pension any 4 weekly payment received between 6th and 10th April would have been at the same rate as the March payment. Payments received between 13th and 17th April £11.05 higher than March, between 20th and 25th £22.10 higher and between 27th and 1st May £33.15 higher. The full £44.20 4 weekly increase will not be seen until payments from May 4th. Your other pensions though would see the full effect of tax on a £46.96 monthly state pension increase in their April payment.

Marcon

To be clear Rachel Reeves extended the freeze for a further three years at Budget 2025 turning what began as an unwelcome, but perhaps not unexpected, post-pandemic tax rise into a ten-year freeze that will leave thresholds unchanged from April 6 2021 to April 5 2031. This is a revenue boosting strategy aimed at hitting 'rich' pensioners.

It isn't and it hardly has any impact on 'rich' pensioners. Those who really suffer are those on a low income. Freezing the personal allowance is a way to raise overall income from taxation without breaching the manifesto commitment not to raise taxes.

Thanks for all the input on this. I hope that the general feeling that my first payments and new tax burden are a reflection of a one-off initial payment oddity is actually true. What us unforgivable is that HMRC must be aware of the potential confusion surrounding these changes but does little to explain or advise people of these problems.

The letter you received earlier this year advising you of the increase to your state pension includes a clear statement that if your total income for the year exceeds your personal allowance you will pay tax on the amount of that 'excess'. It includes a link for further information: https://www.gov.uk/tax-on-pension

Your personal tax account also has plenty of information: https://www.gov.uk/personal-tax-account and is now accessible as an app as well as online.

Other sites (I've linked to several above) have explanations in the most user-friendly language possible for such a complex topic.

What else do you expect HMRC or anyone else to do if people can't be bothered to read the swathes of information available? You can lead a horse to water…

squirrelpie

I think the comments about particular chancellor's actions and those of the various parties are creeping ever closer to the forbidden political discussions. Please stop.