Lump Sum Pension

ZZaffy

I have just received a lump sum state pension with 20% tax deducted on the whole amount.
I thought with a lump sum a percentage was tax free.
Any ideas? Thank you

Simon11

How much was the amount and what percentage of your pot did you take out as a lump sum?

eastcorkram

ZZaffy said:

I have just received a lump sum state pension with 20% tax deducted on the whole amount.
I thought with a lump sum a percentage was tax free.
Any ideas? Thank you

Was this really state pension?

bjorn_toby_wilde

ZZaffy said:

I have just received a lump sum state pension with 20% tax deducted on the whole amount.
I thought with a lump sum a percentage was tax free.
Any ideas? Thank you

I think you may be confused. The state pension has no entitlement to a lump sum.

Can you clarify what this pension is and how you claimed it?

HappyHarry

If it is a lump sum from a deferred state pension (with your state pension being due before  April 2016) then when you claim the lump sum it is paid after the deduction of some tax.

The tax calculation is unique on this lump sum, in that it is based on your tax status in the year of receipt. e.g. if you are 20% taxpayer then you will pay 20% tax on all the deferred lump sum.

Dazed_and_C0nfused

HappyHarry said:

If it is a lump sum from a deferred state pension (with your state pension being due before  April 2016) then when you claim the lump sum it is paid after the deduction of some tax.

The tax calculation is unique on this lump sum, in that it is based on your tax status in the year of receipt. e.g. if you are 20% taxpayer then you will pay 20% tax on all the deferred lump sum.

As will a 0% taxpayer that has income which falls into basic rate band but is taxed at 0% 😉

bjorn_toby_wilde

HappyHarry said:

If it is a lump sum from a deferred state pension (with your state pension being due before  April 2016) then when you claim the lump sum it is paid after the deduction of some tax.

The tax calculation is unique on this lump sum, in that it is based on your tax status in the year of receipt. e.g. if you are 20% taxpayer then you will pay 20% tax on all the deferred lump sum.

Oops. Sorry, I didn’t know about that option.

Every day’s a school day

Dazed_and_C0nfused

bjorn_toby_wilde said:

HappyHarry said:

If it is a lump sum from a deferred state pension (with your state pension being due before  April 2016) then when you claim the lump sum it is paid after the deduction of some tax.

The tax calculation is unique on this lump sum, in that it is based on your tax status in the year of receipt. e.g. if you are 20% taxpayer then you will pay 20% tax on all the deferred lump sum.

Oops. Sorry, I didn’t know about that option.

Every day’s a school day

I suspect there can't be many people left like the op as the State Pension must have now been deferred for nearly 10 years for a lump sum like this to be possible.

Brie

Dazed_and_C0nfused said:

I suspect there can't be many people left like the op as the State Pension must have now been deferred for nearly 10 years for a lump sum like this to be possible.

Lots of people still get their SP late for various reasons, mostly as they choose to.  If it is then back dated it's all in one lump with tax deducted.  Why do you think it would have to have been deferred for 10 years?

HappyHarry

Brie said:

Dazed_and_C0nfused said:

I suspect there can't be many people left like the op as the State Pension must have now been deferred for nearly 10 years for a lump sum like this to be possible.

Lots of people still get their SP late for various reasons, mostly as they choose to.  If it is then back dated it's all in one lump with tax deducted.  Why do you think it would have to have been deferred for 10 years?

The ability to defer a state pension and receive it as a lump sum was only available to people with a state pension date prior to 6th April 2016.

Since then, if you defer your state pension, then you receive an enhanced weekly state pension but there is no option to take a lump sum.

Dazed_and_C0nfused

Brie said:

Dazed_and_C0nfused said:

I suspect there can't be many people left like the op as the State Pension must have now been deferred for nearly 10 years for a lump sum like this to be possible.

Lots of people still get their SP late for various reasons, mostly as they choose to.  If it is then back dated it's all in one lump with tax deducted.  Why do you think it would have to have been deferred for 10 years?

DWP only ever deduct tax from State Pension that was due prior to 6 April 2016 where the pensioner has deferred it and when they eventually decide to commence the pension they op for a deferral lump sum instead of increased weekly payments.

If you know of any other situations where DWP deduct tax from State Pension happy to be corrected.