New state pension not eligible for tax ??????

michaels

Silvertabby said:

michaels said:

QrizB said:

michaels said:

 (is it valued at 20x annual benefit?)

No,.it isn't.

Thanks - so is there any 'rule of thumb' to give an approx CETV? 

Too many factors involved.  Are these benefits deferred, or is your wife still working/paying into the LGPS?  How old is she?  

Current pension value about 150pa.  Still working, earning about 3k pa as an exam invigilator which adds about £50 a year to the pension.  Approx 7 years to retirement, planning to drawdown all DC during those 8 years.

IF personal allowance remains frozen for 8 more years and inflation is 3% pa then the tax on state pension if payable will be about £600 pa in 8 years time, more than her annual pension is likely to be even if she does carry on working for another 7 years (unlikely).  Thus getting her pension out via DC before state pension age sounds like a no brainer unless the CETV is too crazy.  Surely it can't be worse than the 12:1 lump sum rate?

Silvertabby

michaels said:

Silvertabby said:

michaels said:

QrizB said:

michaels said:

 (is it valued at 20x annual benefit?)

No,.it isn't.

Thanks - so is there any 'rule of thumb' to give an approx CETV? 

Too many factors involved.  Are these benefits deferred, or is your wife still working/paying into the LGPS?  How old is she?  

Current pension value about 150pa.  Still working, earning about 3k pa as an exam invigilator which adds about £50 a year to the pension.  Approx 7 years to retirement, planning to drawdown all DC during those 8 years.

IF personal allowance remains frozen for 8 more years and inflation is 3% pa then the tax on state pension if payable will be about £600 pa in 8 years time, more than her annual pension is likely to be even if she does carry on working for another 7 years (unlikely).  Thus getting her pension out via DC before state pension age sounds like a no brainer unless the CETV is too crazy.  Surely it can't be worse than the 12:1 lump sum rate?

Your wife's LGPS may give her a CETV while she is still working, she will have to check with them.  Then, if you decide to go ahead, she will have to opt out and her pension records will then have to be deferred before the transfer can be processed.  This will take at least 3 months from the date of opting out, probably more.  During this time she won't be able to re-join the LGPS and so won't be able to add to her pension accruals (unless she pays into her SIPP instead?)

LGPS transfer values are set by GAD and are notoriously mean.  As I said before, many factors apply so I'm not even going to make a guess - but what I will say is that I've seen CETVs that were just 18 X the annual pension given up.  

michaels

Silvertabby said:

michaels said:

Silvertabby said:

michaels said:

QrizB said:

michaels said:

 (is it valued at 20x annual benefit?)

No,.it isn't.

Thanks - so is there any 'rule of thumb' to give an approx CETV? 

Too many factors involved.  Are these benefits deferred, or is your wife still working/paying into the LGPS?  How old is she?  

Current pension value about 150pa.  Still working, earning about 3k pa as an exam invigilator which adds about £50 a year to the pension.  Approx 7 years to retirement, planning to drawdown all DC during those 8 years.

IF personal allowance remains frozen for 8 more years and inflation is 3% pa then the tax on state pension if payable will be about £600 pa in 8 years time, more than her annual pension is likely to be even if she does carry on working for another 7 years (unlikely).  Thus getting her pension out via DC before state pension age sounds like a no brainer unless the CETV is too crazy.  Surely it can't be worse than the 12:1 lump sum rate?

Your wife's LGPS may give her a CETV while she is still working, she will have to check with them.  Then, if you decide to go ahead, she will have to opt out and her pension records will then have to be deferred before the transfer can be processed.  This will take at least 3 months from the date of opting out, probably more.  During this time she won't be able to re-join the LGPS and so won't be able to add to her pension accruals (unless she pays into her SIPP instead?)

LGPS transfer values are set by GAD and are notoriously mean.  As I said before, many factors apply so I'm not even going to make a guess - but what I will say is that I've seen CETVs that were just 18 X the annual pension given up.  

If an annual pension of £150 results in a tax liability of £600 then even a CETV of 0x is a win!

The plan would be to wait until she has decided not to do any more invigilating and then transfer to DC and draw out prior to state pension age so she then has no other taxable income on top of state pension in order to avoid the state pension being taxed.

In this case drawing it al early and paying 20% tax is only the same tax that would be pad in taking it annually - with the advantage of avoiding state pension tax so no downside only upside.

If the govt come up with stupid policies then people will be forced to do stupid things. 

QrizB

michaels said:

If an annual pension of £150 results in a tax liability of £600 then even a CETV of 0x is a win!

That's quite an unlikely outcome, though.

There's no reason to think that the SP will remain untaxed indefinitely; the official announcements don't even say that it'll be untaxed to start with, just that state pensioners with no additional pension won't be in scope for Simple Assessment.

You seem to be planning for one particular outcome from a future process that hasn't been fully detailed yet.

Silvertabby

Wasn't the 'promise' not to tax a sole income of just the old basic State pension/nSP (the details are still not clear..) limited to the lifetime of this parliament?  

Grumpy_chap

QrizB said:

michaels said:

If an annual pension of £150 results in a tax liability of £600 then even a CETV of 0x is a win!

That's quite an unlikely outcome, though.

There's no reason to think that the SP will remain untaxed indefinitely; the official announcements don't even say that it'll be untaxed to start with, just that state pensioners with no additional pension won't be in scope for Simple Assessment.

You seem to be planning for one particular outcome from a future process that hasn't been fully detailed yet.

Silvertabby said:

Wasn't the 'promise' not to tax a sole income of just the old basic State pension/nSP (the details are still not clear..) limited to the lifetime of this parliament?  

AIUI, the official announcement to Parliament within the Budget was that individuals with just the SP (but now increments) would not have to pay tax via Simple Assessment.

I also understand that the Chancellor in a subsequent interview indicated that these individuals would not have to pay income tax within this Parliament.

The second statement is going beyond the first and adds a number of areas of potential complication.

It may be wise that anyone considering any action based upon the comments around SP and income tax await official clarification.