This is time sensitive

Isn’t life wonderful?  Pensioners have never had it so good!   In the last budget the Chancellor of the Exchequer gave roughly five million pensioners a little bit of extra financial freedom.  We are no longer limited as to the amount of pension we can take and use at any one time, and we can take as much as 100% of any money we have put away in a pension fund (as long as we don’t mind it being taxed!). It all sounds really good, but there are a few things you need to know.

Pensioners are usually allowed to have £10,600 per year before the tax people get involved.  So the law dictates that in addition to the £115.95 a week per single person that we are allowed as a yearly income (provided we paid our 30 years of National Insurance contributions during our working lives), many pensioners have accrued certain additional pension supplements as a result of schemes that the government has put in place over the past 40 or so years. The government has decided that each pensioner needs a minimum of £151.20 per week to live on. Occupational pensions usually provide the short-fall but Pension Credit provides the difference if they don’t.

This means that if you are on that minimum guaranteed income of £151.20 per week (the equivalent of an annual income of £7,862.40), if any other pension entitlements or income you receive during each tax year come to more then £2737.60 you will start paying tax at the basic rate of 20%.  So please do your sums before you decide to take the government up on its offer.

The good news is that the first 25% of any occupational pension lump sum or insurance you receive will still be tax free.

The Department for Work and Pensions sends a letter each year but if you do not understand it you can telephone the pensions service helpline on 0800 731 7898 and for more information about your tax position you will need to telephone the tax office helpline on 0300 200 3300. 

But you can be sure that it will all change again next year!