Tax Misery for State Pensioners

jem16

Jennifer_Jane wrote: »

Thanks, Jem16, but how much state pension will they assume I'm on - or won't that matter?

It will matter as that amount is how much your tax code is adjusted by. You will get a form from HMRC to fill out around a month before getting your pension.

Andy_L

EdInvestor wrote: »

So I make that 3 ways the system discrimiates against women 60-64 now:

1.They get lower pension credit
2.They don't benefit from the the new NI rules post 2010
3.They don't get age tax allowance even though they are officially retired.

As against that they do get the state pension 5 years earlier then men and, on average, live longer as well.

EdInvestor

Andy_L wrote: »

As against that they do get the state pension 5 years earlier then men and, on average, live longer as well.

Since only around 30% of women are entitled to the state pension under the old rules this is hardly a big deal - and of course they can't get an extra 60% pension for their husbands like the men can.

And for anyone under the pension credit level, there is no difference.

Perhaps there should be an increased personal allowance between the basic personal and the age allowance which allows tax free income up to the pension credit level for anyone retired between 60 and 64, male or female.

That would mean we had

Basic personal allowance 5435
Enhanced basic (60-64) 6450 ( pension credit: 124.05 x 52)
Age allowance (65+) 9030

At least people might see it as more fair.

terryw

EdInvestor wrote: »

A .One thing seems odd to me.Why does pension credit kick in at 60 when the official retirement age is 65 for men (and will be 65 for women in due course)?

B Shouldn't a man aged between 60 and 65 be working if he cannot afford to retire because he has other means (such as pensions which start earlier, or savings)?

C If he cannot work, shouldn't he be on job seeker's allowance of some such benefit?

D For instance in terryw's case, I assume his situation will be completely different when he gets to age 65 and claims his and his wife's state pensions, ie there will be quite a big gap then between his position and that of his neighbour on pension credit who's basic position will remain the same?


.

Thanks for the reply. My answers to your questions/queries/points:

A I don't know why Pension Credit kicks in at age 60. It seems daft to me. Strongly suggest that this is to do with government attempts to reduce the working labour-force.

B. A man of 60 should of course be working. I agree with you one hundred percent. But if the government give a non-worker £130 cash in hand and no rent and no council tax what on earth is the point? Oops sorry, I see your point.....only the guys who have savings or a small private pension should be working! I see what you mean....only the guys who have looked to their old age should work.

C Job Seekers Allowance is not given to to anyone who has a private pension above a very small level. Other benefits like sickness or DLA require the claimant to be poorly (unlike Pension Credit)

D. Thanks for mentioning my case. I have five years to go before reaching 60. I will then receive aprox £120 per week for the wife and myself. This is of course taxed (unlike Pension Credit). In five years time I might just have more income than someone on Pension Credit. Yippee... something to look forward to. But I have lost out out on all the passport benefits. And I have saved for my old-age for 40 years whereas some people on pension credit have not.

I can only reiterate for the benefit of any youngsters.......if you bother with a pension scheme make sure it is a good one or don't bother at all. If you are stuck in the middle you will lose out both ways _ when you pay the money in and when you get it back.

terryw












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terryw

margaretclare wrote: »

I've heard this 'no better off than my neighbour' many many times and I still don't agree with it. You either feel that way, want to live your life that way, or you don't. I can sympathise with your point of view but it's not a way of thinking I ever want to embrace.

To put it another way, what you're saying is: if I could go back in time, go back to the beginning of my adult life, would I do things differently? Well, there are many things I'd do differently, but paying full NI contributions and joining the occupation pension scheme are things I would still do. I know many women who had that opportunity, chose not to take it, and it's quite likely that they are the ones on pension credit now and getting all those means-tested benefits. I don't envy them.

Apart from personal relationships, which I'd handle a lot differently, the only other thing money-wise I'd do differently would be to save more and waste less. There are a lot of missed opportunities and wrong decisions there. But I'd certainly still pay into pension schemes if available. Who ever imagined that pension credit would be invented - years ago state pension was considered to be enough to live on, even if living modestly! Who can predict that pension credit will always continue?

I think it's probable that DH and I are doing all right because there are two of us and we each have our own full NI pensions and a few other bits and pieces. We're probably 'in the middle' as terryw puts it, but we think that's the best place to be. Not poor enough for pension credit, we pay our own way, but nowhere near rich enough to have to worry about IHT and who to leave our assets to.

Margaret, you sound like a lovely lady. Lots of good karma. I like the bit about personal relationships....most of us feel that way.

I don't really grumble about my lot in life. I am very philosophical and I am a happy bunny. My main discussion point is about Pension Credit which is a badly thought-out piece of government legislation. We are heading for a real crisis in the future. The levels of pension paid by government can not be sustained. Pension Credit encourages youngsters not to save and to rely upon the state for their old-age. Youngsters MUST save for their old-age.............government will not be able to provide in the years to come for the increasing numbers of old people.

terryw

bigheadxx

Why shouldnt you? The HMRC dont know if you are earning 10k, 50k or £100k.

I also believe you are incorrect about self assesment because the HMRC adjust your tax code by the state pension amount annually automatically. Only if you need to pay more or pay less would you need to inform them and there is usually no need to use the full self assessment forms for this.

Basically, the only pensioners filling in tax returns every year will be those with a need to. So, on that basis I see no misery and no injustice.

If you only receive the state pension then obviously you will not require the services of a Financial Adviser. The fact is that State Pension cannot be taxed at source and the only way of paying income tax liability if you have no other income is via self assessment. If you receive a State Pension of about 7,000 then your income tax liability has just doubled from 10% to 20%.

terryw

bigheadxx wrote: »

Why shouldnt you? The HMRC dont know if you are earning 10k, 50k or £100k.

I also believe you are incorrect about self assesment because the HMRC adjust your tax code by the state pension amount annually automatically. Only if you need to pay more or pay less would you need to inform them and there is usually no need to use the full self assessment forms for this.

Basically, the only pensioners filling in tax returns every year will be those with a need to. So, on that basis I see no misery and no injustice.

If you only receive the state pension then obviously you will not require the services of a Financial Adviser. The fact is that State Pension cannot be taxed at source and the only way of paying income tax liability if you have no other income is via self assessment. If you receive a State Pension of about 7,000 then your income tax liability has just doubled from 10% to 20%.

Surely not. Age allowance for someone over 65 is about £9000 no income would be payable unless state pension was above this figure?

terryw

jem16

bigheadxx wrote: »

If you receive a State Pension of about 7,000 then your income tax liability has just doubled from 10% to 20%.

Only if you are a woman aged 60-64 which is what Ed and I are grumbling about.

As I said earlier the personal allowance for over 65 is £9030 and for over 75 is £9180.

So most pensioners on a state pension would be paying no tax now as opposed to £156.50 before.

Mikeyorks

bigheadxx wrote: »

If you receive a State Pension of about 7,000 then your income tax liability has just doubled from 10% to 20%.

Only if you're female and in the age range 60-65. If you're on a State Pension only, and outside that group .... then you're covered up to at least £9030

EDIT

Sorry Jem didn't see your post!

dunstonh

If you only receive the state pension then obviously you will not require the services of a Financial Adviser. The fact is that State Pension cannot be taxed at source and the only way of paying income tax liability if you have no other income is via self assessment. If you receive a State Pension of about 7,000 then your income tax liability has just doubled from 10% to 20%.

As others have said, if you have a pension of £7000 then you dont need a tax return. Most pensioners never see a tax return after they complete the short pension form telling HMRC what their pensions are when they hit retirement age. And with respect, if you are 60-65 you are not suddenly senile that you cannot fill in a quick bit of paperwork and if you are retired then you have all the time in the world to do it.