"Average Earnings Growth" and triple lock

artyboy

There's an argument to be made for deferring your SP until you have exhausted your drawdown pot and then take the enhanced amount tax free...

LHW99

SnowMan said:

SnowMan said:

Re the issue of the full new state pension being more than the personal allowance from April 2027 this was in the budget

https://assets.publishing.service.gov.uk/media/6926eb102a37784b16ecf525/E03444720_Budget_2025_Web_Accessible.pdf

4.167 State Pension and Simple Assessment – The government will ease the administrative burden for pensioners whose sole income is the basic or new State Pension without any increments so that they do not have to pay small amounts of tax via Simple Assessment from 2027-28 if the new or basic State Pension exceeds the Personal Allowance from that point. The government is exploring the best way to achieve this and will set out more detail next year.

Rachel Reeves has now confirmed to Martin Lewis that someone who is in this situation, that is they have a state pension that takes them over the personal allowance but no other pension, won't during the course of this parliament have to pay the small amount of tax from the state pension moving above the personal allowance in April 2027. 

https://x.com/martinslewis/status/1994166357500346460?s=46&t=wjgj9AHysRwn3YQi4vJFdw

Still leaves lots of questions

1. What happens for someone who receives a new state pension with a protected payment (of whatever size), but no other pension, will they have tax to pay? 

2. What if someone receives the old basic state pension and with SERPS/S2P that takes them above the personal allowance and they have no other pension, will they have to pay tax?

3. What happens for someone who receives a full new state pension, but has no other pension, but has £800 in dividend income or £7,000 in savings income. What tax write off will occur for them? 

4. What happens for someone whose only income is state pension, but has a SIPP but has taken no taxable income from that in the year in question. Will they have tax to pay i.e is it based on having no other pension rather than having no other taxable income from another pension. And if its based on just having another pension how will they be identified as having a SIPP by HMRC? 

I think they will have to do the tax calculation, and then set a maximum amount of tax that will be written off, for those in receipt of a state pension only and with no other private pension income. The maximum could be 20% of the difference between the new state pension and the personal allowance. 

Note if the current parliament ends in August 2029 then the April 2027 increase will push the new state pension above the personal allowance and then there will be two further increases in April 2028 and April 2029. So could perhaps be talking about an amount of tax of say £200-£300 per person per year being written off by the end of the parliament, so an extra winter fuel payment for those in this category. 

Which all sounds as if raising the personal allowance for pensioners to the level of NSP might be a lot simpler - or just leaving things alone!

Grumpy_chap

SnowMan said:

Rachel Reeves has now confirmed to Martin Lewis that someone who is in this situation, that is they have a state pension that takes them over the personal allowance but no other pension, won't during the course of this parliament have to pay the small amount of tax from the state pension moving above the personal allowance in April 2027. 

So someone just over 67 with SP and savings would be better to delay drawing their private pensions?

Dazed_and_C0nfused

LHW99 said:

SnowMan said:

SnowMan said:

Re the issue of the full new state pension being more than the personal allowance from April 2027 this was in the budget

https://assets.publishing.service.gov.uk/media/6926eb102a37784b16ecf525/E03444720_Budget_2025_Web_Accessible.pdf

4.167 State Pension and Simple Assessment – The government will ease the administrative burden for pensioners whose sole income is the basic or new State Pension without any increments so that they do not have to pay small amounts of tax via Simple Assessment from 2027-28 if the new or basic State Pension exceeds the Personal Allowance from that point. The government is exploring the best way to achieve this and will set out more detail next year.

Rachel Reeves has now confirmed to Martin Lewis that someone who is in this situation, that is they have a state pension that takes them over the personal allowance but no other pension, won't during the course of this parliament have to pay the small amount of tax from the state pension moving above the personal allowance in April 2027. 

https://x.com/martinslewis/status/1994166357500346460?s=46&t=wjgj9AHysRwn3YQi4vJFdw

Still leaves lots of questions

1. What happens for someone who receives a new state pension with a protected payment (of whatever size), but no other pension, will they have tax to pay? 

2. What if someone receives the old basic state pension and with SERPS/S2P that takes them above the personal allowance and they have no other pension, will they have to pay tax?

3. What happens for someone who receives a full new state pension, but has no other pension, but has £800 in dividend income or £7,000 in savings income. What tax write off will occur for them? 

4. What happens for someone whose only income is state pension, but has a SIPP but has taken no taxable income from that in the year in question. Will they have tax to pay i.e is it based on having no other pension rather than having no other taxable income from another pension. And if its based on just having another pension how will they be identified as having a SIPP by HMRC? 

I think they will have to do the tax calculation, and then set a maximum amount of tax that will be written off, for those in receipt of a state pension only and with no other private pension income. The maximum could be 20% of the difference between the new state pension and the personal allowance. 

Note if the current parliament ends in August 2029 then the April 2027 increase will push the new state pension above the personal allowance and then there will be two further increases in April 2028 and April 2029. So could perhaps be talking about an amount of tax of say £200-£300 per person per year being written off by the end of the parliament, so an extra winter fuel payment for those in this category. 

Which all sounds as if raising the personal allowance for pensioners to the level of NSP might be a lot simpler - or just leaving things alone!

But as giving all pensioners, or even just those in receipt of the State Pension, extra allowances would be very expensive leaving things alone is the sensible option.

SnowMan

Grumpy_chap said:

SnowMan said:

Rachel Reeves has now confirmed to Martin Lewis that someone who is in this situation, that is they have a state pension that takes them over the personal allowance but no other pension, won't during the course of this parliament have to pay the small amount of tax from the state pension moving above the personal allowance in April 2027. 

So someone just over 67 with SP and savings would be better to delay drawing their private pensions?

It depends how this is implemented in practice. But it has the potential to create a lot of anomalies. 

I think the chancellor would have been better off not committing to writing off the tax until a detailed implementation was worked out, even if the eventual outcome/intention was to write off relatively small amounts of tax for some people. 

Dazed_and_C0nfused

Grumpy_chap said:

SnowMan said:

Rachel Reeves has now confirmed to Martin Lewis that someone who is in this situation, that is they have a state pension that takes them over the personal allowance but no other pension, won't during the course of this parliament have to pay the small amount of tax from the state pension moving above the personal allowance in April 2027. 

So someone just over 67 with SP and savings would be better to delay drawing their private pensions?

This is what the Budget announcement said so if those savings generated any taxable income this measure wouldn't appear to apply to them.

It looks increasingly like it could be quite a narrow group of people who will benefit from this.

State Pension and Simple Assessment – The government will ease the administrative burden for pensioners whose sole income is the basic or new State Pension without any increments so that they do not have to pay small amounts of tax via Simple Assessment from 2027-28 if the new or basic State Pension exceeds the Personal Allowance from that point. The government is exploring the best way to achieve this and will set out more detail next year.

Silvertabby

Before you all get too excited, I'm certain that what she said isn't what she meant.  No doubt her staff are drafting a 'clarification' statement as we speak....

Taken at face value, her interview comment that 'those on just the State pension won't pay tax' seems clear.  But I really don't think she means that all those 'old' pensioners with high levels of SERPS etc will be tax exempt.   

Dazed_and_C0nfused

Silvertabby said:

Before you all get too excited, I'm certain that what she said isn't what she meant.  No doubt her staff are drafting a 'clarification' statement as we speak....

Taken at face value, her interview comment that 'those on just the State pension won't pay tax' seems clear.  But I really don't think she means that all those 'old' pensioners with high levels of SERPS etc will be tax exempt.   

Agree, the budget statement covered this,

State Pension and Simple Assessment – The government will ease the administrative burden for pensioners whose sole income is the basic or new State Pension without any increments so that they do not have to pay small amounts of tax via Simple Assessment from 2027-28 if the new or basic State Pension exceeds the Personal Allowance from that point. The government is exploring the best way to achieve this and will set out more detail next year.

SnowMan

I agree the budget statement is likely to be what applies in practice

A protected payment in the new state pension is likely to be considered an increment.

Not sure what the basic state pension bit means in the budget statement because if there is no increment that presumably means someone receiving no SERPS or S2P, and then they aren't going to breach the personal allowance from their basic state pension alone in any case.

Perhaps someone whose only other income is £400 say of savings interest will be I guess likely covered because that falls within the 0% rate starter savings rate for savings (and £1,000 savings allowance 0% band). If the interest is higher but still covered by a combination of the starter savings rate for savings 0% band and the 0% rate £1,000 savings allowance then that may or may not be OK. And if someone has dividend income below £500 from some old privatisation shares for example that may be OK.    

onomatopoeia99

JoeCrystal said:

So basically anyone with high SERPs/2SP and deferred as it's only source of income is going to be a winner. Silvertabby's friend must be so happy at the moment if it is only source of income! 😁

No, the budget document says "with no increments" so any of those things you list get you excluded from the income tax exemption.