Tax on pension increase at 55

Discussion in 'Finance, Property, Law' started by out@last, Jun 4, 2013.

Welcome to the Army Rumour Service, ARRSE

The UK's largest and busiest UNofficial military website.

The heart of the site is the forum area, including:

  1. Appreciate some help/ideas on the following from ARRSE's learned ladies & gents.....

    I hit 55 next year and my MOD pension is likely to increase by about £5-6k. At the moment about £6k of my combined salary & pension is in the 40% tax bracket. Here's the there any way of avoiding (not evading!) paying 40% tax on the pension increase next year?

    Any suggestions on stopping Osborne getting his sweaty mitts on my Wonga would be greatly appreciated.
  2. I'm no IFA and I may be wrong but one way of reducing your tax liability is to (get the irony) pay the amount that takes you over the 40% tax bracket into a private pension. Not a brilliant solution if you want to get at your money right away but may make real old age a bit more bearable.
  3. BiscuitsAB

    BiscuitsAB LE Moderator

    Not a bad response for a farmboy. Salary Sacrifce is the way forward on this one, your employer needs to agree but they probably will as its benefits them.

    Want any help setting it up pm me where you are and I'll put you to one of our inhouse IFA's
  4. One potential downside is that HMRC won't allow you to take pension income into account when working out allowable income for the purposes of pension contributions.

    Personal Pension Relief: Relevant earnings

    Salary sacrifice, yes.. definitely one to consider. Don't become so fixated on being tax efficient when growing wealth that you aren't tax efficient when drawing from it. Getting lots of tax back now sounds great, and is, but how mkuch tax might you be paying when retired? Pensions can be a double edged sword.