TAX AND YOUR RETIREMENT BENEFITS
HM Revenue & Customs controls and your Retirement BenefitsFrom 6 April 2006, HM Revenue & Customs (HMRC) introduced controls on the pension savings you can have before you become subject to a tax charge.
The Lifetime Allowance is the total capital value of all your pension arrangements, but not your state pension, which you can build up without paying extra tax.
If the value of your benefits when you draw them (not including any State Pension, State Pension Credit or any spouse’s, civil partner’s, cohabiting partner’s or dependant’s pension you may be entitled to) exceed your Lifetime Allowance, a tax charge will be made against the excess.
There are protections for benefits earned up to 5 April 2006 in respect of those high earners affected by the introduction of the Lifetime Allowance from 6 April 2006. You can find out more about these from Factsheet 2 - Your LGPS benefits and tax changes in England and Wales.
The Fund will let you know the value of your LGPS benefits on retirement and ask you about any other pensions you may have in payment, so we can work out whether we need to deduct a recovery tax charge. If you do not provide this information promptly it could delay the payment of your pension.
Also, under HMRC rules, if the LGPS makes an unauthorised payment or if you recycle your lump sum back into a pension arrangement, there will be a tax charge.
Income Tax and your Pension
Your LGPS pension is taxable, but your lump sum is tax-free. Whether you pay tax when you retire depends on the amount of your pension and your personal circumstances including:
- whether you are going to work again or have other income
- whether you have any income from savings and investments
- how old you are
