Defined Benefit Pension advice

Deenport

Hello. Looking for some advice please on accessing my Defined Benefit Pension, I am 56 yo. Having previously worked for the local council, I was enrolled into their pension (NESPF) for many years. Due to the start date, my pension provides an Automatic tax free Lump Sum of £40k plus an annual pension for life. My current role is very stressful and is taking its toll on me and I would like to retire early. 

My question is, if I retire next year (age 57) but then decide on a small stress free part time position earning basic wage, approx £15k p/a, will I be taxed on the combined total of £40k + £15k + salary or will it just be £15k + salary? 

I am not tax savvy, so may I ask that any responses are easy for me to understand. Thank you x

Dazed_and_C0nfused

Deenport said:

Hello. Looking for some advice please on accessing my Defined Benefit Pension, I am 56 yo. Having previously worked for the local council, I was enrolled into their pension (NESPF) for many years. Due to the start date, my pension provides an Automatic tax free Lump Sum of £40k plus an annual pension for life. My current role is very stressful and is taking its toll on me and I would like to retire early. 

My question is, if I retire next year (age 57) but then decide on a small stress free part time position earning basic wage, approx £15k p/a, will I be taxed on the combined total of £40k + £15k + salary or will it just be £15k + salary? 

I am not tax savvy, so may I ask that any responses are easy for me to understand. Thank you x

Why do you think the "Automatic tax free Lump Sum" would become taxable 🤔

Marcon

Deenport said:

Hello. Looking for some advice please on accessing my Defined Benefit Pension, I am 56 yo. Having previously worked for the local council, I was enrolled into their pension (NESPF) for many years. Due to the start date, my pension provides an Automatic tax free Lump Sum of £40k plus an annual pension for life. My current role is very stressful and is taking its toll on me and I would like to retire early. 

My question is, if I retire next year (age 57) but then decide on a small stress free part time position earning basic wage, approx £15k p/a, will I be taxed on the combined total of £40k + £15k + salary or will it just be £15k + salary? 

I am not tax savvy, so may I ask that any responses are easy for me to understand. Thank you x

That tax free lump sum is just that: a one off tax free payment.

You'd only be taxed on any salary you earn + your regular annual pension payment - and then only to the extent it exceeds your annual personal allowance of £12,570.

Secret2ndAccount

Tax free lump sum is tax free, outside of tax, not taxed, never taxed.  You will be taxed on your annual pension + your part time wage. The tax might be a bit iffy at the start - too much or possibly too little taken. You can get in touch with HMRC to sort it, or just leave it alone. It should sort itself out over time once your situation becomes clear.

Deenport

Dazed_and_C0nfused said:

Deenport said:

Hello. Looking for some advice please on accessing my Defined Benefit Pension, I am 56 yo. Having previously worked for the local council, I was enrolled into their pension (NESPF) for many years. Due to the start date, my pension provides an Automatic tax free Lump Sum of £40k plus an annual pension for life. My current role is very stressful and is taking its toll on me and I would like to retire early. 

My question is, if I retire next year (age 57) but then decide on a small stress free part time position earning basic wage, approx £15k p/a, will I be taxed on the combined total of £40k + £15k + salary or will it just be £15k + salary? 

I am not tax savvy, so may I ask that any responses are easy for me to understand. Thank you x

Why do you think the "Automatic tax free Lump Sum" would become taxable 🤔

Because I would be earning once more and paying tax as normal, and so thought that the lump sum would therefore be considered as income when HMRC set my tax code for any new job that I might start. 

I am not very savvy about these things and will be taking formal advice but really just wanted a heads up in advance. 

Marcon

Deenport said:

Dazed_and_C0nfused said:

Deenport said:

Hello. Looking for some advice please on accessing my Defined Benefit Pension, I am 56 yo. Having previously worked for the local council, I was enrolled into their pension (NESPF) for many years. Due to the start date, my pension provides an Automatic tax free Lump Sum of £40k plus an annual pension for life. My current role is very stressful and is taking its toll on me and I would like to retire early. 

My question is, if I retire next year (age 57) but then decide on a small stress free part time position earning basic wage, approx £15k p/a, will I be taxed on the combined total of £40k + £15k + salary or will it just be £15k + salary? 

I am not tax savvy, so may I ask that any responses are easy for me to understand. Thank you x

Why do you think the "Automatic tax free Lump Sum" would become taxable 🤔

Because I would be earning once more and paying tax as normal, and so thought that the lump sum would therefore be considered as income when HMRC set my tax code for any new job that I might start. 

I am not very savvy about these things and will be taking formal advice but really just wanted a heads up in advance. 

You don't need 'formal advice', but by all means take it if it would put your mind at rest.

Deenport

Marcon said:

Deenport said:

Hello. Looking for some advice please on accessing my Defined Benefit Pension, I am 56 yo. Having previously worked for the local council, I was enrolled into their pension (NESPF) for many years. Due to the start date, my pension provides an Automatic tax free Lump Sum of £40k plus an annual pension for life. My current role is very stressful and is taking its toll on me and I would like to retire early. 

My question is, if I retire next year (age 57) but then decide on a small stress free part time position earning basic wage, approx £15k p/a, will I be taxed on the combined total of £40k + £15k + salary or will it just be £15k + salary? 

I am not tax savvy, so may I ask that any responses are easy for me to understand. Thank you x

That tax free lump sum is just that: a one off tax free payment.

You'd only be taxed on any salary you earn + your regular annual pension payment - and then only to the extent it exceeds your annual personal allowance of £12,570.

Thank you, that doesn’t sound too bad then really. I’m glad I asked as I have been stressing a little. Much appreciate your answer 

Deenport

Secret2ndAccount said:

Tax free lump sum is tax free, outside of tax, not taxed, never taxed.  You will be taxed on your annual pension + your part time wage. The tax might be a bit iffy at the start - too much or possibly too little taken. You can get in touch with HMRC to sort it, or just leave it alone. It should sort itself out over time once your situation becomes clear.

Thank you so much for replying. Sounds like I might be on my way to a less stressful life. 

Deenport

Secret2ndAccount said:

Tax free lump sum is tax free, outside of tax, not taxed, never taxed.  You will be taxed on your annual pension + your part time wage. The tax might be a bit iffy at the start - too much or possibly too little taken. You can get in touch with HMRC to sort it, or just leave it alone. It should sort itself out over time once your situation becomes clear.

Thank you. Lots of great help here, and the fact that you are all saying much the same gives me the confidence I need to perhaps take that leap into retirement 

Deenport

Marcon said:

Deenport said:

Dazed_and_C0nfused said:

Deenport said:

Hello. Looking for some advice please on accessing my Defined Benefit Pension, I am 56 yo. Having previously worked for the local council, I was enrolled into their pension (NESPF) for many years. Due to the start date, my pension provides an Automatic tax free Lump Sum of £40k plus an annual pension for life. My current role is very stressful and is taking its toll on me and I would like to retire early. 

My question is, if I retire next year (age 57) but then decide on a small stress free part time position earning basic wage, approx £15k p/a, will I be taxed on the combined total of £40k + £15k + salary or will it just be £15k + salary? 

I am not tax savvy, so may I ask that any responses are easy for me to understand. Thank you x

Why do you think the "Automatic tax free Lump Sum" would become taxable 🤔

Because I would be earning once more and paying tax as normal, and so thought that the lump sum would therefore be considered as income when HMRC set my tax code for any new job that I might start. 

I am not very savvy about these things and will be taking formal advice but really just wanted a heads up in advance. 

You don't need 'formal advice', but by all means take it if it would put your mind at rest.

Thanks Marcon. It would seem that my best avenue for “real advice“ from those in the know is right here. You have all put a big smile on my face this evening. I can almost feel the stress leaving. 

daveyjp

I would check your local government pension figures first.  The figures given may be the amount if you retire at normal retirement age of 65 and not 56.  Depending on years of service snd rule of 85 protection you may end up with a large reduction for taking the pension early.