Pensions

#1
I've been reading up on pensions as I didn't really understand my pension scheme (I'm not military - but it affects us all I guess) and according to the direct.gov website pensions are a taxable income (news to me, but I'm not surprised)....

But surely the contribution that I have to pay for my scheme (9.5%) are already taxed as I pay them? (i.e. the 9.5% are deducted after tax - when I tried to use an indicative online tax calculator, that was the impression given at least, see here for an example...NB.That's just a nice round figure, not the amount I earn)

Have I made a mistake of understanding here? Or are we really taxed twice on our pension!? If we are, then surely there is a way to claim it back?
 

oldbaldy

LE
Moderator
#2
No. When your pensions contribution is deducted from salary you pay tax on the remaining, net, salary. Therefore giving you tax relief on your contribution.
 
#3
ah, thanks...so my 9.5% somes out of the gross amount. Cheers. Was tying myself in knots getting mightily confused...
 

oldbaldy

LE
Moderator
#4
bensonby said:
ah, thanks...so my 9.5% somes out of the gross amount. Cheers. Was tying myself in knots getting mightily confused...
That's correct & you then pay tax on the remaining 90.5%.
Anyone paying in a personal pension pays a net amount & the pensions company grosses that up by claiming tax relief on the payment.
In simple terms if you make a payment of £80 per month, £100 is paid into your pensions fund.
 
#5
Basic Military Pensions, along with Civil Service and Local Government, and State Pensions will probably go up by around 5 Per Cent come April/May 2009. The increase is based on the rate of inlfation calculated from September. In september this year, 2008, official inlation rate was around 5% so it is understood.

The Forces Pensions Society also suggests that Forces Pension will go up by around 5 Per Cent.
 

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