Newly retired and on 40% tax now.

[tommysheridanistheman]

I attended such a seminar bakes but prior that time F.F's did not get enough in lump sum to be affected.
I retired just as the rules changed and with the higher commutation figures went over the limit set by HMRC.
Glad to see its now all mentioned for the betterment of all personnel.

[Thorshammer]

I was told by a guy from the sppa who came round to talk to us at the station about the new pension scheme that you should always take the full 25% commutation as you will always come out with a higher lump sum even if you pay the tax on the higher amount. He ran through several examples to show what he meant and he did say that , yes , you can take a lower tax free lump sum, but that would mean that you would have a slightly higher pension on which you would pay slightly more tax and that over the years you could end up paying more in tax than you would have paying a one off payment to get a bigger lump sum.

[Benito M]

I was told by a guy from the sppa who came round to talk to us at the station about the new pension scheme that you should always take the full 25% commutation as you will always come out with a higher lump sum even if you pay the tax on the higher amount. He ran through several examples to show what he meant and he did say that , yes , you can take a lower tax free lump sum, but that would mean that you would have a slightly higher pension on which you would pay slightly more tax and that over the years you could end up paying more in tax than you would have paying a one off payment to get a bigger lump sum.

Did what you suggest several years ago when I retired after doing the maths.
And the best bit, your parting shot is that the employer also has to pay their tax liability on this, why do people think they discourage this?

[bill.advanced]

I was told by a guy from the sppa who came round to talk to us at the station about the new pension scheme that you should always take the full 25% commutation as you will always come out with a higher lump sum even if you pay the tax on the higher amount. He ran through several examples to show what he meant and he did say that , yes , you can take a lower tax free lump sum, but that would mean that you would have a slightly higher pension on which you would pay slightly more tax and that over the years you could end up paying more in tax than you would have paying a one off payment to get a bigger lump sum.

There is no one size fits all on this one, there are some factors involved in this decision.
First your longevity, if you are relatively young and in good health and feel you have msny years left then possibly that could be the wrong decision, but of course there are no guarantees there.
Then we have the rate of tax you will pay on retirement against what you will pay once retired. You could be earning close to or even over the 40% threshold whilst working, but once retired you would drop to 20%. Meaning that if you take the larger lump the excess amount will be taxed st 40%, whereas paying tax on it from your pension would mean the lower rate of 20% would be paid. Like I said there is no one size fits all, it depends on your personal circumstances.

[Tornado]

Met a recently retired
Work colleague today
And he was telling me
He just received his
Tax code for 2018/2019
And it seems he will be
Paying tax on his full
Monthly pension as his
Tax code has become 0

He retired in
September last year

It appears the tax office
Think his pension is an
Income running along side
His Fire Service salary

His personal allowance
(The amount you earn before you pay tax)
Has been worked out to be
included on his sevice salary
Which he no longer receives
Therefore the tax office assume
His pension is an additional income

A long conversation with the
Local tax office soon sorted
This problem out and a new
Tax code was sent the following week

Any recently retired colleagues
Out there please watch out for
This mistake by HM Revenue & Customs

[Nightstaffer]

The twelve months after you retire can be beset with " tax issues"

My wife was PAYE for 40 years with the same employer
A few months after retiring she got a letter from HM REVENUE. saying that she owed £x and her tax code would be amended
Several different tax codes followed and it took two years to get it straightened out

Myself? I took a part time job after 12 months retired. There followed flurry of letters advising of different tax code every month or so.
Still not convinced several years later that they ever got it right

And then you arrive at state pension age and time to watch out again

[bill.advanced]

My advice in such a situation is not to communicate via telephone or email, but to request a meeting with a tax inspector at your nearest tax office. Make sure you take all relevant paperwork and documentation. I was advised to do this whilst still working in the service by an accountant, and I found it solved all of my tax anomalies soon after the meeting. Many issues with tax are created due to lack of communication, talking directly to a tax inspector bypasses normal indirect communication that can lead to miss understanding on both sides. I have always found the tax people very helpful.