UK State Pension

Kirkstall Blue said:
I’m not sure how a pensioner with a basic state pension of £11,502 is better off than someone with a take home pay after tax of £20,652.
A pension has to be earned someone on minimum wage still needs to earn their pension, you can’t add the tax allowance and call that take home pay when the majority of pensioners only have £11,502 to live on, but you can’t add a private pension that not everyone has and tax that separately
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The comment was around tax thresholds, not in relation to value of the actual pension which Ive already said is too low previously. It was proposed by another member that the whole of the pension should not count in any way towards the tax threshold. which would create a significant discrepancy between working people and those drawing a pension. The tax free allowance should always increase, ensuring that the state pension is never taxed.

Tax and what's right or wrong is a very emotive subject and its clear from the comments that everyone has a different perspective.
 
Unless I am reading some of the posts incorrectly I think some may be getting a bit confused about the tax free element.
You cannot begin to draw on a private pension from the age of 55 which rises to 58 from 5th April 2028.
You can from those ages, decide what you are going to do, carry on paying in, freeze it, part take it or buy what is called an annuity.
If you decide to cash it in full 25% can be drawn tax free the other 75% is taxable.
A main consideration is if it is a large pot it may result in tax being paid at higher rates.
If you have already retired at say 55 it is too early to draw the state pension so it is wise to look at other income you may have.
To keep it simple, very little other income then it would be worth considering drawing down £15000 per year, 25% tax free leaving £12000 taxable which would be covered by your personal allowance.
You may wish to continue drawing down if there is enough money in the pot year on year until state pension pays out
Any undrawn money in the pension pot can eventually be used to purchase what is called an annuity which will pay out an annual sum until death.
My experience of these is the return from them is very poor and you never get the pot back and they are not usually inflation linked.
A good bond or long term deposit account often offers better returns taking in to account you get interest and your money back.
 
sir baconface said:
Sorry but your first paragraph makes no sense at all. And so your question at the end has no basis in reality.
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It does with respect to the post from the other member saying that the state pension should not count to the tax free allowance. I appreciate that many people have private pensions that pay very little on top of the state pension, some none at all, the response was purely around fairness if we had significantly different tax rules for working people and pensioners.
 
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SilverFox2 said:
Surely the state pension has always been taxable. It is just paid tax free ie gross because it uses up allowances so that that the tax burden falls mainly on other pensions or earnings.
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I think you have mis understood what he means. He was saying pre 2016 the State pension was lower and hence wasn’t a threat to going over the personal allowance.. I don’t think he was saying it was paid out tax free which of course it wasn’t
 
hampshireblue said:
The TFC would still be part of your estate. It's far more tax efficient to take it over a few years and the chunk not taken continues to grow in your pension. Of course if you have a load of debt or mortgage then using the TFC to pay that off is sensible.
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Ye mis communication mine is public sector so doesn’t grow
 
sir baconface said:
Sorry but your first paragraph makes no sense at all. And so your question at the end has no basis in reality.
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Kompany Car said:
It does with respect to the post from the other member saying that the state pension should not count to the tax free allowance. I appreciate that many people have private pensions that pay very little on top of the state pension, some none at all, the response was purely around fairness if it we had significantly different tax rules for working people and pensioners.
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Would that be one of those posters who don’t seem to understand the difference between personal allowances and income?
 
sir baconface said:
Would that be one of those posters who don’t seem to understand the difference between personal allowances and income?
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Which posters are you talking about?

Because a pension that is equivalent to NMW, i.e. 24k, and a taxable allowance of 24k tax free have been talked about in this thread.

Of course they are two different things.

The thread was started by someone who believes state pensions should be 24k.
 
Mr Kobayashi said:
Which posters are you talking about?

Because a pension that is equivalent to NMW, i.e. 24k, and a taxable allowance of 24k tax free have been talked about in this thread.

Of course they are two different things.

The thread was started by someone who believes state pensions should be 24k.
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I’ve not logged names but one or two posts have been either completely confused or very poorly expressed.
 
Kompany Car said:
The comment was around tax thresholds, not in relation to value of the actual pension which Ive already said is too low previously. It was proposed by another member that the whole of the pension should not count in any way towards the tax threshold. which would create a significant discrepancy between working people and those drawing a pension. The tax free allowance should always increase, ensuring that the state pension is never taxed.

Tax and what's right or wrong is a very emotive subject and its clear from the comments that everyone has a different perspective.
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There fact remains that for some people their older SERPS and Grad extra contributions to SP mean they are already being taxed.
In other words because NI contributions are a percentage of the wage/salary they have paid more into the system so like all pension schemes they should/do get more pension.
 
denislawsbackheel said:
Your idiotic suggestion that the state pension should never be added to taxable income means that at £12K would be added to the tax free threshold of £12K giving them a tax free income of £24 K from all sources.
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A potential tax free income. You (or the original poster) are assuming that every pensioner has the level of savings to generate that level of passive income, which is patently not the case. I'm not saying I disagree with your sentiment, but massaging the figures like that doesn't really help the argument
 
SilverFox2 said:
There fact remains that for some people their older SERPS and Grad extra contributions to SP mean they are already being taxed.
In other words because NI contributions are a percentage of the wage/salary they have paid more into the system so like all pension schemes they should/do get more pension.
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Thats a fair comment.
 
halfmist said:
Just a note regarding the national minimum wage . It is an hourly rate not an annual rate. On that basis, the amount you get paid annually, depends on how many hours you work in a year.
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Yes in the example values were for a 40hr working week which in the private sector tends to be the default. Public sector being typically 35hrs.
 
If you sign up for job seekers allowance, thar gives you pension credits the same as a working person who pays NI.

With the theory being discussed here, someone could not work a single day of their life and live off universal credit then get their income doubled when they reach the age if 65/66/67.
 
flook said:
A potential tax free income. You (or the original poster) are assuming that every pensioner has the level of savings to generate that level of passive income, which is patently not the case. I'm not saying I disagree with your sentiment, but massaging the figures like that doesn't really help the argument
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Nail on head
 
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