UK pensions

[Ricardo]

Ricardo, on 30 Jan 2015 - 16:11, said:

FWIW I've just arranged to cash-in, at age 60 and under the 'old' pre-5/4/2015 rules, a small (circa GBP 4k) pension held with Standard-Life.

The first 25% is tax-free, the balance is having 20% income-tax deducted, under P.A.Y.E. and with a P45 to be issued after settlement to show the basis of taxation.

Since I have absolutely no other UK-income arising this year, I expect to be able to reclaim the tax from HMRC later this calendar-year, by filing a Tax-Return for y/e 5th April 2015. A pain-in-the-a** but worth my time to recover GBP 627 !

Ricardo, why are you paying 20% tax on an income of £4K?

Similar to you I cashed in 2 pensions at age 61. I took the 25% tax free lump sum and an income of £9,5K.

I contacted HMRC because is was just under the Personal Allowance, who in turn contacted my Pension provider and issued a coding that allows my provider to pay the full amount......no tax deducted.

Because my personal income isn't expected to increase until I'm 65, I don't have to file tax returns either.

Thanks for posting your own experience ... it all helps, to share our individual knowledge/experience, IMO.

I'm paying it, because the pension-provider is deducting it, and not offering me any alternative, but I'm relaxed about that since I'm confident that I will get it back fairly rapidly afterwards. I think perhaps they are instructed by HMRC to deduct tax at P.A.Y.E. rates, and force us to sort the refund-claim out afterwards ? Anyway this first policy is just a one-off payment/tax-claim, because it's relatively small, so can all be taken in one year.

I plan to do the larger second-policy (which is with another provider) after 6th April, take the 25% tax-free plus say-GBP 10k, in the 2015/16 tax-year, and the rest over the next few years while staying below the annual-limit, if they.offer that option, not having to do the blasted paperwork would be a definite bonus if possible. For that larger first-year payment, mostly the tax-free 25%, and subsequent years it will definitely be worth my trying to do it your way instead, and get the subsequent-payments paid gross & without filling-in tax-returns ?

We all know that things will change after 6th April, the question I think is just how flexible individual pension-providers will be, when it comes to varying the sums allowed to be drawn-down in subsequent years, it promises to be an interesting time for sure ! I'm also not sure how resilient the pension-providers, or even the markets where they currently have the funds invested, might prove if there is a significant wave of early/full-redemptions !

The Chancellor has been reported as saying, he doesn't think we'll all be taking the cash & running, but I beg to differ ! For those who are overseas (admittedly the minority of pensioners overall), especially outside the EU, why would we want to risk pushing our post-66/67/68-year-old annual-income above the Personal-Allowance limit, if indeed we can avoid doing so, as some perhaps can ? And others may prefer a lump-sum now, and a lower long-term pension, if it keeps them in a lower tax-band ?

Not doing so would only result in an avoidable /higher tax-bill, better to take the money & run, get it offshore and outside the tax-net, where we can spend/invest it as we see fit !

[nong38]

Dave Cam has identified a group of potential voters in the UK GE which he is hoping to target for votes, surprisingly its not ex pat pensioners but people who have just immigrated into the UK from places like Pakistan, Bangladesh and the like! Is this man completely out of touch? Does he not know who his people are?

Perhaps we should not be surprised at all, they all pander to minorities and treat us like safe votes, well this time it will be different.

[metisdead]

Off topic posts and replies have been removed, this is about UK Pensions, not UK Politics.

[Liquorice]

Ricardo, You can also complete form R85 which stops your bank or building society deducting tax from any interest payable.

You may want to rethink your strategy.

The first 25% is tax free, thereafter 20% tax up to £31,866, then 40% tax up to £150,000.

Taking the full pot could cost 30% in tax.

It seems not all pension providers are prepared to play ball

George Osborne, the Chancellor, had promised savers "complete freedom" to withdraw "as much or as little of their pension pot as they want, anytime they want".

But there is no law requiring companies to allow unlimited access.

Only 1 in 20 pension providers will allow savers to cash in come April.

https://uk.finance.yahoo.com/news/most-savers-blocked-cashing-pensions-210024474.html

[Ricardo]

Ricardo, You can also complete form R85 which stops your bank or building society deducting tax from any interest payable.

Thanks, but I closed my last onshore/taxable accounts a decade ago, when I became non-resident, moving to Thailand. However that's good advice for others.

You may want to rethink your strategy.

The first 25% is tax free, thereafter 20% tax up to £31,866, then 40% tax up to £150,000.

Taking the full pot could cost 30% in tax.

But if I draw down the taxable 75% over 4-5 years, with each tranche slightly-below my Personal-Allowance, then it should all be tax-free.

It seems not all pension providers are prepared to play ball

George Osborne, the Chancellor, had promised savers "complete freedom" to withdraw "as much or as little of their pension pot as they want, anytime they want".

But there is no law requiring companies to allow unlimited access.

Only 1 in 20 pension providers will allow savers to cash in come April.

https://uk.finance.yahoo.com/news/most-savers-blocked-cashing-pensions-210024474.html

So fingers-crossed, that the provider of my own second-policy is one of those, which is more-flexible, or that one of their options DOES match my aims.

[Liquorice]

It doesn't matter how or when you draw lump sums and It's only the first 25% that is tax free...........period.

I see how your thinking but it doesn't work that way.

Your pension provider will automatically deduct tax once you go over the 25% tax free limit, regardless of the year or years you draw it.

Your trying to circumvent the law on taxation of Pensions using the yearly taxable allowance as an excuse.

You could always contact HMRC to reclaim the tax deducted by your pension providers claiming it's within your yearly personal allowance.

IMHO you've more chance of being decapitated by a Frisbee or finding Elvis alive.

[Ricardo]

It seems not all pension providers are prepared to play ball

George Osborne, the Chancellor, had promised savers "complete freedom" to withdraw "as much or as little of their pension pot as they want, anytime they want".

But there is no law requiring companies to allow unlimited access.

Only 1 in 20 pension providers will allow savers to cash in come April.

https://uk.finance.yahoo.com/news/most-savers-blocked-cashing-pensions-210024474.html

One of the points the link makes, is that "Xafinity asked 80 company pension schemes whether they would give their 250,000 members access to the new freedoms in April. In response, 58 per cent said they were "undecided". A further 15 per cent had already ruled out the possibility."

This survey is therefore of "company pension schemes", only the third of my (relatively small, sub 100k) schemes is directly with a former employer's scheme (Unilever), and that's guaranteed to grow from now until retirement-age at 8.5% p.a., which I feel is fairly generous in the current climate & this is therefore the scheme I'm least-likely to take before maturity. It's already growing well, and not being eaten-away by fees & charges, so I'm happy to leave it well alone !

Another point made, in the video-clip interview with Tom McPhail of investment-advisers Hargreaves Lansdowne, is that these pension-decisions are complex & that many investors are unprepared for making them. That's all true, but is also what one might expect to hear, from any company which makes its' living from managing funds for others ! Not however to cast any particular aspersion on his own company, which I dealt with over several years a couple of decades ago, and found IME to be one of the better ones. Although last time I enquired, they didn't offer products to non-residents, so I don't use them now.

That many pension-companies have, despite a couple-of-years warning that this was coming, failed to prepare for the changes comes as no great surprise, perhaps they're hoping for a change-of-government in May, so that their nightmare will all go away ?

That the government has also announced complete freedom to withdraw as much as we want, whenever we want (albeit with some tax implications), but then failed to actually legislate for unlimited access is similarly no great surprise ! They are, after all politicians, so delivering their promises is also a secondary priority, once they've been elected !

But I do agree with them all, that this is an exciting development, unexpected & challenging but also with real potential to free up some of us, compared to the decades-old previous regime. Which is also why it's worth discussing on TV, as we all grapple with it, over the next few years.

[Ricardo]

You could always contact HMRC to reclaim the tax deducted by your pension providers claiming it's within your yearly personal allowance.

IMHO you've more chance of being decapitated by a Frisbee or finding Elvis alive.

But the last I heard, Elvis is still alive, and living in Pattaya !

Regarding reclaiming the PAYE charged by my first pension-provider, we shall see ...

My current understanding is that I'll be charged income-tax at my top marginal-rate, which should however be zero , if the sum drawn-down is under my personal-allowance, and I have no other income arising within the UK.

If I'm wrong, then I'll have learned that at a cost of only several hundred pounds, on cashing-in my first/smallest policy.

[nontabury]

You could always contact HMRC to reclaim the tax deducted by your pension providers claiming it's within your yearly personal allowance.

IMHO you've more chance of being decapitated by a Frisbee or finding Elvis alive.

But the last I heard, Elvis is still alive, and living in Pattaya !

Regarding reclaiming the PAYE charged by my first pension-provider, we shall see ...

My current understanding is that I'll be charged income-tax at my top marginal-rate, which should however be zero , if the sum drawn-down is under my personal-allowance, and I have no other income arising within the UK.

If I'm wrong, then I'll have learned that at a cost of only several hundred pounds, on cashing-in my first/smallest policy.

Anyone any idea,as to how far back you can claim for any overpayment?

[transam]

Just heard about a guy who got a new passport which lead to the pension folk presenting the guy with a demand for 30,000 quid.

He ain't got it, so his pension has to cover it until paid.

[alfieconn]

It doesn't matter how or when you draw lump sums and It's only the first 25% that is tax free...........period.

I see how your thinking but it doesn't work that way.

Your pension provider will automatically deduct tax once you go over the 25% tax free limit, regardless of the year or years you draw it.

Your trying to circumvent the law on taxation of Pensions using the yearly taxable allowance as an excuse.

You could always contact HMRC to reclaim the tax deducted by your pension providers claiming it's within your yearly personal allowance.

IMHO you've more chance of being decapitated by a Frisbee or finding Elvis alive.

If Ricardo pays tax at source and it is under his Personal Tax allowance then of course he can claim it back, everybody has a personal tax allowance of 10,000 pounds whereby you do not pay tax if you have earned under this amount.

[JohnC]

On my retirement I cashed in a small pension a previous company had paid into, the forecast was so insignificant I decided I could do better with the lump sum. I was taxed at 32% ? Anyway as I was used to doing paye etc I contacted HMRC with my projection and stated I was over taxed, they replied with a cheque for just under £1000 which was less than 50p difference to my claim, so yes they do listen and give refunds where due.

[petercool]

an off topic post a replies quoting that were removed

[jpinx]

On my retirement I cashed in a small pension a previous company had paid into, the forecast was so insignificant I decided I could do better with the lump sum. I was taxed at 32% ? Anyway as I was used to doing paye etc I contacted HMRC with my projection and stated I was over taxed, they replied with a cheque for just under £1000 which was less than 50p difference to my claim, so yes they do listen and give refunds where due.

I did something similar -- After many years paying into their scheme, in June 1998 AxA sent £13k to me and £48k to Pru for a taxable annuity/pension which started out at £291 per month. I can't remember if the lump of £13k was taxed or not, but my memory says it was exempt under the rules at that time - or I would not have taken it. Since then the taxman has taken a chunk out of my pension and the effective rate of return on my investment in a pension is reduced to a level below the purchase of a sole residence (profits on sale not taxed). The only big difference is that now I get two hundred and something per month cash, whereas a property investment would not be paying for my lunch

It's very difficult to know what way to arrange for one's old age -- given the continuously diminishing return on investment in the UK state pension scheme and the ability of successive governments of all political colours to screw pensioners both state and private. If I was doing it all again I might have kept the more successful of the various companies I had and diversified into multiple and international business sectors while I had the energy required to do that. Conversely I might have bought gold and stashed it under the bed. It's very much Hobson's Choice, but now the die is cast and I have to weather old age with whatever fiscal nonsense exists in the world year after year. The only thing I regret is not becoming a resident of somewhere like Philippines so that my state pension would not lose it's increments, and it would cut the UK taxman out of the loop. No need to live there, just make it your official country of residence.

Edit to add---- It might not be too late to do that........

[evadgib]

A free service which helps people locate pension pots they have lost track of will triple its number of staff to meet record numbers of enquiries.

The Pension Tracing Service will have its headcount tripled to 49 by April.

http://www.bbc.com/news/uk-31079930

[i claudius]

Just heard about a guy who got a new passport which lead to the pension folk presenting the guy with a demand for 30,000 quid.

He ain't got it, so his pension has to cover it until paid.

that sounds a lot because if he did not tell them he had left the country his overpayments would be about 5pounds a week so 250 a year then double next year,how old is he to owe 30k,? I should live so long 555

[jpinx]

A free service which helps people locate pension pots they have lost track of will triple its number of staff to meet record numbers of enquiries.

The Pension Tracing Service will have its headcount tripled to 49 by April.

http://www.bbc.com/news/uk-31079930

http://www.bbc.com/news/www.gov.uk/find-lost-pension/

404 - Page Not Found

[transam]

Just heard about a guy who got a new passport which lead to the pension folk presenting the guy with a demand for 30,000 quid.

He ain't got it, so his pension has to cover it until paid.

that sounds a lot because if he did not tell them he had left the country his overpayments would be about 5pounds a week so 250 a year then double next year,how old is he to owe 30k,? I should live so long 555

I thought the same, but I did not ask questions from a Thai lady, just listened.......Seems her husband could be in a similar boat............

[i claudius]

Just heard about a guy who got a new passport which lead to the pension folk presenting the guy with a demand for 30,000 quid.

He ain't got it, so his pension has to cover it until paid.

that sounds a lot because if he did not tell them he had left the country his overpayments would be about 5pounds a week so 250 a year then double next year,how old is he to owe 30k,? I should live so long 555

I thought the same, but I did not ask questions from a Thai lady, just listened.......Seems her husband could be in a similar boat............

I did hear of a guy who was caught ,but not through his passport renewal,how would they find out? The passport service do not liaise with the pension service

[transam]

Dunno, just what I was told.....................The guys pension is now 25 quid until the overpayment is paid..... I just listened cos I could not advise the lady on her case...........BUT, in her/his case......Very complicated.......Will not talk here..........

My point is.........folk can be stuffed if naughty......

[Jip99]

Just heard about a guy who got a new passport which lead to the pension folk presenting the guy with a demand for 30,000 quid.

He ain't got it, so his pension has to cover it until paid.

that sounds a lot because if he did not tell them he had left the country his overpayments would be about 5pounds a week so 250 a year then double next year,how old is he to owe 30k,? I should live so long 555

I thought the same, but I did not ask questions from a Thai lady, just listened.......Seems her husband could be in a similar boat............

I did hear of a guy who was caught ,but not through his passport renewal,how would they find out? The passport service do not liaise with the pension service

I would never doubt a story from transam but ,frankly, it is highly doubtful that anyone (other than an Interpol wanted felon) would be linked by his passport to an offence such as this.

[i claudius]

Dunno, just what I was told.....................The guys pension is now 25 quid until the overpayment is paid..... I just listened cos I could not advise the lady on her case...........BUT, in her/his case......Very complicated.......Will not talk here..........

My point is.........folk can be stuffed if naughty......

I was led to believe they can't stop your old age pension ,they would have to take you to court and then could not take so much that you would basically starve

[transam]

Dunno, just what I was told.....................The guys pension is now 25 quid until the overpayment is paid..... I just listened cos I could not advise the lady on her case...........BUT, in her/his case......Very complicated.......Will not talk here..........

My point is.........folk can be stuffed if naughty......

I was led to believe they can't stop your old age pension ,they would have to take you to court and then could not take so much that you would basically starve

Again, dunno....If one moves to a "non" recognised country perhaps they don't give a toss, perhaps if one gets on a plane back home stuff is different as to being taken care of.....I don't know.

Just a meeting with this lady and listen to her story (s)..

[loppylugs1]

Just heard about a guy who got a new passport which lead to the pension folk presenting the guy with a demand for 30,000 quid.

He ain't got it, so his pension has to cover it until paid.

Just heard about a cow that couldn't jump a ditch,had to wade through a load of shit

[evadgib]

A free service which helps people locate pension pots they have lost track of will triple its number of staff to meet record numbers of enquiries.

The Pension Tracing Service will have its headcount tripled to 49 by April.

http://www.bbc.com/news/uk-31079930

http://www.bbc.com/news/www.gov.uk/find-lost-pension/ 404 - Page Not Found

The link in my op still works

[JB300]

I'm not sure if it's ok to link to an article in the Bangkok Post but there's an interesting article on there called "Bringing your UK pension to sunnier climes".

[Ricardo]

It doesn't matter how or when you draw lump sums and It's only the first 25% that is tax free...........period.

I see how your thinking but it doesn't work that way.

Your pension provider will automatically deduct tax once you go over the 25% tax free limit, regardless of the year or years you draw it.

Your trying to circumvent the law on taxation of Pensions using the yearly taxable allowance as an excuse.

You could always contact HMRC to reclaim the tax deducted by your pension providers claiming it's within your yearly personal allowance.

IMHO you've more chance of being decapitated by a Frisbee or finding Elvis alive.

If Ricardo pays tax at source and it is under his Personal Tax allowance then of course he can claim it back, everybody has a personal tax allowance of 10,000 pounds whereby you do not pay tax if you have earned under this amount.

That is my impression, but I will post an update, whether or not I eventually do manage to get a refund.

Although Standard-Life had said 7-10 days before the proceeds reached me, the lump-sum (25% tax-free + 75% less 20% income-tax) actually hit my Jersey bank-account within 2 days of the phone-call, a good start.

One slightly-related point, I vaguely recall once hearing that with-holding-tax (10% ?) on UK-company dividends could not be reclaimed/refunded via an income-tax return ? Does anyone know if that's correct, or was ever correct, or was just a false-impression I'd got ?

[JB300]

True, you cannot reclaim the withholding tax on UK company dividends irrespective of nationality or residency status, however the good thing about being a non-UK resident for tax purposes is its limited to the 10% withheld & you won't have to pay more if the dividend income takes you above the higher tax rate thresholds.

[Ricardo]

I'm not sure if it's ok to link to an article in the Bangkok Post but there's an interesting article on there called "Bringing your UK pension to sunnier climes".

Interesting article, easily found on their website, and does suggest that it might be more tax-efficient (and will be possible) to take draw-down over a few years & within each years' Personal-Allowance. But it's largely about QROPS.

[i claudius]

Just heard about a guy who got a new passport which lead to the pension folk presenting the guy with a demand for 30,000 quid.

He ain't got it, so his pension has to cover it until paid.

Just heard about a cow that couldn't jump a ditch,had to wade through a load of shit

Although as someone else said i trust Transams posts ,it seems strange that no one has ever commented that the pension service are contacted by the passport service and to owe 30000 pounds the pension service would have to have been overpaying his oap by 57 pounds a week for 10 years(the life of a passport)