Tax on pension

[Stef]

Hi I don't know if this is a silly question. I am in Pension Plan C. I plan to retire from Royal Mail on my 60th birthday in the first week in January 2028 with 39 years service. My NRA60 pension is £10,900 per year.Let's presume I receive my very 1st NRA60 pension payment on 31st January 2028. My question is will I pay tax on my pension? My understanding is that I will pay tax on my pension in January February and March until the end of that financial year as i have used all my £12,000 odd tax free allowance for that financial year.Then in April 2028 as it is a new tax year I won't pay tax. Hopefully you can understand that. I would just like to know if my understanding is correct or have I misunderstood things.

[RobertT]

Your understanding is correct.

If your income is below the personal tax allowance(currently £12,570), you shouldn't be paying any income tax.

With the caveat that HMRC don't always get things right straight away, so any tax you may pay initially will be refunded. That should happen automatically but can take some time, so it may be best to inform them of your situation at the time.

You may be able to do that online via the HMRC app/website, although I have no personal experience of doing that.

It's also possible your own personal tax allowance could vary from the standard rate, depending on your exact circumstances. For example, yours is probably slightly higher as an RM employee, as you should be getting a uniform cleaning allowance.

[Postie Malone]

I presume that you are paid weekly. If so, you are given 1/52 of you tax free allowance each payday with Royal Mail. When you retire you will still have around a quarter of your personal tax allowance for the year available, so in theory you won't pay tax on those first 3 pension payments.

The reality is that it may take some time for HMRC to notify your pension provider of the correct tax code to use, so you may end up paying basic rate tax at first on your pension and then have to get that refunded later when things get sorted out.

[Stef]

Many thanks for your replies RobertT and Postie Malone. Very interesting the points you have made. That clarifies alot. Thanks

[twoloops]

You need to let this sink in £10,900 a year pension for thirty nine years service ..... thirty f'cking nine years ..... shocking


This is why you vote no to the pay deal

[RobertT]

You need to let this sink in £10,900 a year pension for thirty nine years service ..... thirty f'cking nine years ..... shocking
This is why you vote no to the pay deal

He clearly only mentions his Age60 pension, which is what he accrued up to 2010, so that's around 21 years service!

Therefore if he leaves in January 2028, he'll presumably also have 8 years worth of Age65 pension, 6.5 years of DBCBS and 3.25 years of RMCPP.

[Stef]

RobertT is spot on here with his calculations

[NWpostie]

You need to let this sink in £10,900 a year pension for thirty nine years service ..... thirty f'cking nine years ..... shocking
This is why you vote no to the pay deal

He clearly only mentions his Age60 pension, which is what he accrued up to 2010, so that's around 21 years service!

Therefore if he leaves in January 2028, he'll presumably also have 8 years worth of Age65 pension, 6.5 years of DBCBS and 3.25 years of RMCPP.

Very interesting to learn about how much you're getting with 39 years service at NRA60 without the NRA65, BDCBS and RMCPP.

I'm in a similar situation with 38 years service and paid in an AVC flexiplan and bonus plan which is showing a decent return, in 3 years I'll be eligible for my NRA60 without reductions.

I may consider carrying on working, I've not decided that yet.

[tractorboy2]

Your understanding is correct.

If your income is below the personal tax allowance(currently £12,570), you shouldn't be paying any income tax.

With the caveat that HMRC don't always get things right straight away, so any tax you may pay initially will be refunded. That should happen automatically but can take some time, so it may be best to inform them of your situation at the time.

You may be able to do that online via the HMRC app/website, although I have no personal experience of doing that.

It's also possible your own personal tax allowance could vary from the standard rate, depending on your exact circumstances. For example, yours is probably slightly higher as an RM employee, as you should be getting a uniform cleaning allowance.

There are some things you cannot do on the website such as tell it you no longer work , I had to ring them up.

[RobertT]

There are some things you cannot do on the website such as tell it you no longer work , I had to ring them up.

In my case, I didn't have to tell them at all. They seemed to know what my tax position was automatically.

[Stef]

That's great RobertT thanks for that. Thanks to all who left a comment.