Local gov pension advice

pedro789

Hi

I’m 57 retiring in Jan 27 and will start taking my local gov pension (£20,000 p/a) and I have rental income (£10,000 p/a)

I’m currently employed earning £59,000 but paying £3000 p/m into AVC via salary sacrifice.

I’m worried I’ll be over £50,000 threshold and have to pay 40% tax on my local gov pension. Do AVC/salary sacrifice reduce my taxable income? If so it should be well below 40% threshold?

Appreciate any insight/advice, thanks.

El_Torro

It sounds like you are currently a 40% tax payer but won't be when you retire. What makes you think otherwise?

FYI any earnings over £50,270 a year should be taxed at 40%.

la531983

https://forums.moneysavingexpert.com/discussion/comment/82148521#Comment_82148521

Maybe he is taking the pension and continuing to work?

In any case my understanding is he/she would have to cut their work hours or grade if they did this so he/she will unlikely be earning 59k plus 20k pension plus 10k rental income.

pedro789

https://forums.moneysavingexpert.com/discussion/comment/82148521#Comment_82148521

Thanks for reply. I should've added more context. This year (April - Dec), I'll have earned £44,000 from salary and £7000 from rental income.

That would mean I'm over 40% threshold when I start taking local gov pension in Jan.

But I've paid £3000 p/m to AVC via salary sacrifice. So the taxable income is £21000 (ish). I'm assuming this means I'll only pay 20% on pension?

pedro789

https://forums.moneysavingexpert.com/discussion/comment/82148541#Comment_82148541

No I'm retiring. Just worried salary so far this year will take me over threshold. See response above thanks

la531983

https://forums.moneysavingexpert.com/discussion/comment/82148555#Comment_82148555

I see. Is deferring for 3 months not feasible or are you knackered lol?

pedro789

https://forums.moneysavingexpert.com/discussion/comment/82148564#Comment_82148564

It's been deferred for 3 years, this is new job since I left local gov.

Yeah I'm knackered 😂

El_Torro

https://forums.moneysavingexpert.com/discussion/comment/82148549#Comment_82148549

This makes a bit more sense. The £44k and £7k both count as taxable income, so you'll earn £51k income, which takes you into 40% territory. However you are right in saying that pension contributions essentially reduce your taxable income, so yes, you'll only have about £21k of taxable earnings by the end of December. As long as your pension income and other income is less than £29k between January and April the 5th then you'll be a 20% tax payer this tax year.

pedro789

https://forums.moneysavingexpert.com/discussion/comment/82148604#Comment_82148604

Thanks a lot 👍