Changes to pension Tax Relief

[Stingray]

Has anyone read DIN 01-003 yet???

I have browsed through it and as a non-adminer type am very confused regarding what it is actually saying.

In a nutshell, AA has been reduced from 255K smackers to 50K.
Does this mean that a person who retires and receives a pension golden hand shake of more than 50K will be taxed on it or will it be anything over 50K that will get taxed????

Or, if the SP earns more than 50K, he will get taxed regardless????

Any help most appreciated!!

 

[busby1971]

Nothing like that thex clue is in the annual allowance bit, cannot remember which but it is either the max amount of contributions, ie increase in pot, or increase in value of payout, I think its the former.

Shouldn't affect many in the forces, I would expect our theoretical contribution, employee and employer to be about 30% of gross income max, so until you earn about £150 k you should be okay.

 

[shish, chop.. halloumi.]

Has anyone read DIN 01-003 yet???

I have browsed through it and as a non-adminer type am very confused regarding what it is actually saying.

In a nutshell, AA has been reduced from 255K smackers to 50K.
Does this mean that a person who retires and receives a pension golden hand shake of more than 50K will be taxed on it or will it be anything over 50K that will get taxed????

Or, if the SP earns more than 50K, he will get taxed regardless????

Any help most appreciated!!

No, the sum you get on retirement is free of tax (a good reason to consider commutation). The income you'll get from AFPS will be treated as taxible income (unless war pension, etc).

Of course, you can always consider using the income you get from your pension (or even the tax fgree lump sum) and re-invest it in a private pension and get 20 or 40% tax relief on it. Better still, if your partner doesn't work, start one up for him/her. You still get tax relief - they have (from later this year) £7500 pa annual allowance, so you get extra money from tax relief as you invest in, and they can take up to £7500 pa out, without getting taxed.

Bargain.

 

[sandy parts]

No, the sum you get on retirement is free of tax (a good reason to consider commutation). The income you'll get from AFPS will be treated as taxible income (unless war pension, etc).

Of course, you can always consider using the income you get from your pension (or even the tax fgree lump sum) and re-invest it in a private pension and get 20 or 40% tax relief on it. Better still, if your partner doesn't work, start one up for him/her. You still get tax relief - they have (from later this year) £7500 pa annual allowance, so you get extra money from tax relief as you invest in, and they can take up to £7500 pa out, without getting taxed.

Bargain.

That would be lovely to do - so of course it is illegal!
Called 'pension recycling'.
Google or look on HMRC site for more info but if you are aware you are getting some sort of 'pension income' (even in the near future - so not actually got it yet) - you can't stick an equivalent lump sum into your other pension and get the tax uplift. Up to you to prove the money going into your second pension is not from another pension.
No idea how 'Special Capital Payment' and 'Resettlement Grant' falls with regard to this though....
I'm not an adviser etc etc pants go down as well as up, your home is at risk if you are stupid enough to leave lit candles all around it blah blah usual legalese disclaimer.

 

[shish, chop.. halloumi.]

That would be lovely to do - so of course it is illegal!
Called 'pension recycling'.
Google or look on HMRC site for more info but if you are aware you are getting some sort of 'pension income' (even in the near future - so not actually got it yet) - you can't stick an equivalent lump sum into your other pension and get the tax uplift. Up to you to prove the money going into your second pension is not from another pension.
No idea how 'Special Capital Payment' and 'Resettlement Grant' falls with regard to this though....
I'm not an adviser etc etc pants go down as well as up, your home is at risk if you are stupid enough to leave lit candles all around it blah blah usual legalese disclaimer.

You're absolutely correct, up to a point. It isn't recycling if it is submitted 'out of income' that you are otherwise making. So, if you get another job when you leave at for instance, at the 22 year point (as we all do, hopefully) and one that is paying you, say 40k, then you can contribute up to that limit (gross) from (for example) your gratuity and get the tax relief at your standard rate.

If you earn, say, £49,000 (Higher Rate taxpayer), and if you wanted to pay a lump sum contribution of £29,400 into a personal pension, then you get get the sum bumped up to £49,000 by George Osborne as a 'thank you' for looking after your own future.

 

[Soon To Leave]

No you can't. You can only claim 40% tax relief on the portion of earnings you pay 40% tax. The rest would be at 20%.

 

[shish, chop.. halloumi.]

If you are a Higher Rate tax payer, you are entitled to 40% tax relief on all contributions up to the amount of your gross salary (the annual personal allowance is changing in April of this year to £50000). 20% is added to your fund immediately, and 20% via self assesment. If you earn for instance, £45000 and are paying in (gross) £47000 per annum, you get no tax relief on the amount of £2000.

Someone earning £23000 as a normal rate tax payer is entitled to 20% tax relief on all contributions up to £23000. A non tax paying person, such as a mother staying home raising a family, is still encouraged to save for retirement. She would be entitled to 20% tax relief on payments up to £3600 per annum. In other words, the other half chips in £2880 for her and the State makes it up to £3600 automatically.

 

[amfortas]

I get a pension quarterly, sent from Paymaster 1836. Currently it is at a rate twice what I was paid when I left the service. Just shows what inflation does.

Last quarter it arrived considerably short of what it should have been. I phoned from across the world ( I live at the arse end of Oz) and was told that the Tax Office was now deducting tax and they could do nothing about it.

I phoned the Tax Office and politely told them to sort themselves out or I would come back to the UK as an Immigrant and demand ten times as much in benefits and housing.

They restored my tax-free staus and informed the Paymaster. I got it all refunded within a month.

It is notable that the pay I recieved when I was serving was terrible. I left in '82. The pension since then has risen bit by bit until now I am getting twice as much as my full pay then. As my nearest civilian counterpart (Air Traffic Controller) was paid three times as much as me for ordinary time work, I reckon I am still behind but catching up.

Mind you, I see from another thread .... Based on the current average Cpl's salary of say, £26,020..... well, that is 4 times what I was paid back then as an Orifficer.

I hope to live to a ripe old age and have the stingy bar stewards in Guvmunt continue to pay for me. I also hope that women take over all the tax-paying jobs in the UK and have to fund my extravagances, especially my nappies when I eventually become incontinent and P*** on them all !