PENSION DEDUCTIONS

[apache]

What deductions do you pay on your annual pension after taking it at 57yr. with a lump sum?.i.e.TAX,NI.

[RobertT]

What deductions do you pay on your annual pension after taking it at 57yr. with a lump sum?.i.e.TAX,NI.

Pension income is subject to income tax in the same way as your wages are now. The current personal tax allowance is £6,475 per year so everything after that is taxed at 20%. This allowance is due to go up to £7,475 in April 2011 and the ConDems have said they will increase it to £10,000 by the end of their 5 year term in office.

You shouldn't pay NI on any pension income.

[stephen500]

What deductions do you pay on your annual pension after taking it at 57yr. with a lump sum?.i.e.TAX,NI.

Pension income is subject to income tax in the same way as your wages are now. The current personal tax allowance is £6,475 per year so everything after that is taxed at 20%. This allowance is due to go up to £7,475 in April 2011 and the ConDems have said they will increase it to £10,000 by the end of their 5 year term in office.

You shouldn't pay NI on any pension income.

Correct me if I am wrong But as far as I am aware you pay no income tax or NI on the lump sum, just on the interest that you earn from it.
As far as the pension is concerned it is as stated taxable at the rate above until you get to 65 when the tax allowance rises to
:£9,490
Personal Allowance (1) £6,475 at 60
Income limit for Personal Allowance £100,000
Personal Allowance for people aged 65-74 £9,490 (after 65)
http://www.hmrc.gov.uk/rates/it.htm" onclick="window.open(this.href);return false;
So you are better off after 65.
it may well be that this increased allowance at 65 changes overtime with the default state pension age.

[RobertT]

Correct me if I am wrong But as far as I am aware you pay no income tax or NI on the lump sum, just on the interest that you earn from it.

No need to correct you as you are right, although whether you pay tax on any interest will depend on where you put your money.

As far as the pension is concerned it is as stated taxable at the rate above until you get to 65 when the tax allowance rises to
:£9,490
Personal Allowance (1) £6,475 at 60

The tax allowance for under 65's will increase by £1,000 in April 2011.
http://www.direct.gov.uk/en/Nl1/Newsroo ... /DG_183037" onclick="window.open(this.href);return false;

Income limit for Personal Allowance £100,000

I doubt if anybody on here will be too concerned about that.

So you are better off after 65.

Not necessarily as it really depends where your money is and when you decide to access it.

it may well be that this increased allowance at 65 changes overtime with the default state pension age.

I agree

[darude]

I'm 55, Looking to take my pension.Going for the larger lump sum option.Someone at work told me anything over £32 thousand is taxable.Anyone know if this is true ?

[RobertT]

I'm 55, Looking to take my pension.Going for the larger lump sum option.Someone at work told me anything over £32 thousand is taxable.Anyone know if this is true ?

Pension lump sums are tax free. Redundancy lump sums are subject to tax above £30,000.

[darude]

Thanks for that.