Why has my pension gone down?

[ANAPROP]

So I'm on the 2005 AFPS and retired last August...

As the AFPS's saw a 1.2% increase this year, and as the personal allowance went up to £10,500, how come I'm seeing £50 a month less in my pension? I'm not paying NI so a change there wouldn't affect it...

Is there some other tax sleight of hand I've missed?

If you are a pensioner your thoughts are welcome.

And another thing (while I'm at it!), how come the Armed Forces Pension Society web site doesn't have its own forum?

[Wander00]

Don't know the answer to any of that - AFPS, could, and tell you why they don't have a forum. An e-mail will surely get a response

[Courtney Mil]

I think AFPS want you to join rather use them as a free forum. Apart from anything else, that would mean users getting correct advice rather than what other members think is right - like you get here! :cool:

[Wander00]

Apologies - I forgot to mention joining AFPS.

[Pontius Navigator]

Anaprop, if your sole income is your Service pension the maths is simple.

Annual salary minus personal allowance times .2 will give the tax you should be paying in the year. Or the same times .8 plus your personal allowance will give your net annual salary.

Why are you paying more? Look at your notice of coding from HMRC and the coding used for your pension, are they the same? Is the coding to the pension people for the full £10,500?

Maybe you underpaid tax last year and the extra £50 is the claw back. This might have occurred because you retired last year having been paying tax at 40% using all your allowance but given the same allowance a second time against your pension.

Just get both sets of paperwork out and reconcile last year's tax and this years notices.

[glad rag]

I had this scenario last year: company admin negligence [to put it mildly] left the door open for HMRC to apply a recalculation onto my RAF Pension!!

Took almost 11 months to sort out-good luck!!!

[Wander00]

ISTR there some anomaly with NI and Government pensions that gets resolved (ie Government pension reduces) when State (ie Old Age) pension kicks in

[Pontius Navigator]

Wander,I think it is the State SERP s that changed, not sure but I didn't notice a change. The other gotcha is the warnings limit over £24.5k where you lose £1 of allowance for every £2 over the limit thus giving a tax rate of 30%.

However the OP implied that he only had the Service pension.

[Biggus]

It'll be a change in tax code - my pension went down by £100 a month for the same reason....

Oh, why did this happen, because the pension paymasters applied the full personal allowance to my pension payments for the year, and the RAF had done the same to my pay for my last few months in service. As a result I had had the benefit of 2 personal allowances and had paid too little tax, and it was clawed back by changing my tax code.

The OP should have got a letter from the pension paymasters telling him his new overall pension for the year 15-16, which should have gone up by 1.2%, and how much this would equate to a month, which appears to have gone down, given the tax code he is currently operating under according to HMRC!

[Lima Juliet]

I think AFPS want you to join rather use them as a free forum. Apart from anything else, that would mean users getting correct advice rather than what other members think is right - like you get here!

Courtney

If only! The one and only time I contacted the AFPS they gave me duff gen about Regular to FTRS transition. So I contacted SPVA and got the right answer of what actually happened. Now AFPS were probably having a bad day, but it does show that they too are able to make mistakes.

I personally decided that I would be £35 richer each year by dealing with SPVA from now on. :cool:

LJ

[Skeleton]

Wander
An e-mail will surely get a response

You would think so wouldn't you but both AFPS and Equiniti Paymaster are very adept at trotting out the good old auto-response promising a reply within 10 days then totally ignoring your e-mail. I give them the 10 days then repeat my e-mail, have done so for the last 2 months with no response from either of them, I know the answer to my question now but i am interested to see how long they intend to take.
I would also be very wary of any information given to you by Equiniti, i have had recent dealings with them on another matter and the best I can say is if there was an alternative I would definitely be shopping there, they really were making it up as they went along. :mad:

[teeteringhead]

Might well be a connection with the State Pension if you are receiving one. I guess you are as you mention not paying NI.

HMRC cannot deduct tax from State pensions, which are always paid gross - with no tax deducted - so you get the full Monty - about £5.8k. But if you over the threshold to pay tax, you still owe tax, so it will be deducted from another pension or pay.

£50 a month is about 10% of your pension, and 10% is the initial rate of tax .......

Personal allowance is £10.6k, after that the first £5k is taxed @ 10%, so if your other pension is about £9 or 10k, then you'll be taxed @ 10% on the rest - which is about your £50 a month! Simples.

[david parry]

T...Your personal allowance can rise to £11,660, if you are eligible to transfer your marriage allowance

[Pontius Navigator]

TTH, no 10% rate.

Dave Parry, correct, but make sure you do it the right way or you lose £1000.

It is the non-tax payer that must ask HMRC to transfer part
Of their allowance to the tax payer.

[Chainkicker]

Personal allowance is £10.6k, after that the first £5k is taxed @ 10%, so if your other pension is about £9 or 10k, then you'll be taxed @ 10% on the rest - which is about your £50 a month! Simples.

Teeters is a bit out on the tax rate.

Basic rate 20% - £0 to £31,785 - People with the standard Personal Allowance start paying this rate on income over £10,600

Add your annual state pension to the annual military pension, deduct the 10600 and see what 20% of the remaining figure is. If it's £50 (ish) there's the answer :ok:

[Pontius Navigator]

Chainkicker, not quite.

Take your gross service pension and state pension and subtract £10600 is correct to a point.

If, after deduction of your allowance your taxable pay is over £24,500 (IIRC), your personal allowance is cut by £1 for every £2 above this. [I think this is correct but I am away from home right now]

[teeteringhead]

Close but no cigar! :ugh:

Mea culpa.

[Chainkicker]

Chainkicker, not quite.

Take your gross service pension and state pension and subtract £10600 is correct to a point.

If, after deduction of your allowance your taxable pay is over £24,500 (IIRC), your personal allowance is cut by £1 for every £2 above this. [I think this is correct but I am away from home right now]

I made the assumption the original poster was a basic rate tax payer. Its a bit different for higher rate taxpayers. Oh, and if the Gov website is to be believed, clawback doesnt start till 100k earnings (or I could be misreading it).

[Lordflasheart]

If you can post on Prune *** you can handle your own tax unless your income or job is very specialist, in which case an accountant may be preferable. The best DIY way is to pay £30 or so per year for an excellent commercial tax calc programme. This will allow you to check your tax to the penny and see for yourself if your coding is correct. You can then decide whether to register with the Govt Gateway and HMRC. It takes a while but when done you can log-in and web-message them to correct your code if it's a big error, or you can wait until year's end and pick up any refund with an on-line tax return from within the programme.

HMRC may tell you that you do not have to submit a tax return. That does not mean you should assume you will be taxed correctly. Significant errors occur even with simple PAYE and pension income. You can only be sure if you have checked it for yourself. If it is wrong, it is then time to submit a tax return. You can also use such commercial programmes to submit returns for friends and family and I have secured several thousand ££ of refunds this way. Funny that it's always over-collection of tax. I've never met an under-payment situation but I did succeed with an ESC A19 application for under-collected PAYE, where HMRC held the information but failed to use it, while assuring the unsuspecting customer that everything was being taken care of.

Personally I avoid phoning HMRC and personally I prefer not use HMRC's online tax return software. Assembling all your info is often time consuming and I find it easier to do it at my leisure and only when I am sure it's all sorted do I go on-line and submit.

A Tax Coding is nothing more than someone's best guess for the current year.

Hope this helps. .......... LFH


*** excluding pics > 850 x 850 ;)

[Pontius Navigator]

CK, it relates to pensions and tax relief and applies to lower rate tax payers as well.

I am not sure about 15/16 but certainly applied in earlier years.

[Chainkicker]

CK, it relates to pensions and tax relief and applies to lower rate tax payers as well.

I am not sure about 15/16 but certainly applied in earlier years.

The OP was asking about tax paid on his pension, not tax relief (and limits) on pension contributions.

Correct figures are here https://www.gov.uk/government/publications/tax-and-tax-credit-rates-and-thresholds-for-2015-16/tax-and-tax-credit-rates-and-thresholds-for-2015-16 at para 2

[ANAPROP]

Many thanks for all the replies guys!

To clarify, having retired last year at 55, I was only getting the AFPS at the time of my tax code calculation. However I've now started some part-time work, so have registered for self assessment for this tax year...

Looking through my paper work I find that I received an Equiniti Advice of Payment in April showing a tax code of 1060L (as one would have expected), with a pension increase of only 0.8%, rather than the full 1.2% (not sure why).

However, in May, I received another Advice of Payment informing me of a tax code change to 560L, so I presume they've decided I underpaid last year...

[Voxpop]

The first pension increase is proportionate depending when in the year you retired. If the CPI increase was 1.2% and you got only .8%, my guess is that you retired in August

[Pontius Navigator]

CK, the OP has clarified the question but to square the circle, I was talking only of pensions and tax thereon and NOT tax relief on pension contributions.

I certainly had my age relief last year pared back as I received more than the £27,500 limit. This year the age relief for my age group has been abolished.

The ways of HRMC are a mystery to all, including themselves. This year they have applied all my tax coding to one of my pensions which is less than the permitted relief. My other pensions and jobs are all taxed at 20%.

[Pontius Navigator]

ANAPROP, you really need to examine last year's tax too. Taking Vox as correct, you got your full Service pay taxed at 20/40% for April to July at the rate assuming you would be paid at that rate for the year. When you ceased work yo h may have been given your overpaid tax back. Your pension, taxed separately at 20% would have been correct. However your combined income 4 months full pay taxed at 20% plus pension ditto,could put you back in 40%. In my case there was an underpayment of £1200 but as I expected this I simply banked it until if was due.

[Chainkicker]

The ways of HRMC are a mystery to all, including themselves. This year they have applied all my tax coding to one of my pensions which is less than the permitted relief. My other pensions and jobs are all taxed at 20%.

They most certainly are. When I left I informed them in writing well in advance that I had no intention of seeking paid employment. Followed it up with a couple of phone calls to ensure they had received and actioned said letter.
Yet sure enough, despite the first advice from paymaster having the correct coding, the 2nd one had been changed to BR and no personal allowance applied!
Somewhat messed up my budget calculations, took 3 months to sort and another 7 months to get the tax refunded...

[Could be the last?]

Not quite on thread, but is there any read across to mil pensions?

How a lone fireman has won a £550million pensions bonanza | Daily Mail Online (http://www.dailymail.co.uk/news/article-3157658/How-lone-fireman-won-550million-pensions-bonanza.html)

[Wander00]

Hope someone is running a double check for the Services

[Could be the last?]

I was hoping the oracle, AI R, would have an inside line on whether it had impacted any service leavers over the same period.........?

[AllTrimDoubt]

To clarify, having retired last year at 55, I was only getting the AFPS at the time of my tax code calculation. However I've now started some part-time work, so have registered for self assessment for this tax year...

Looking through my paper work I find that I received an Equiniti Advice of Payment in April showing a tax code of 1060L (as one would have expected), with a pension increase of only 0.8%, rather than the full 1.2% (not sure why).

However, in May, I received another Advice of Payment informing me of a tax code change to 560L, so I presume they've decided I underpaid last year...

ANAPROP

Almost identical situation having retired in Jan AFPS 05 (PA Spine) and suddenly found after a few months income decreased markedly. Tax code mysteriously dropped to 560L. Several hours on hold and a few choice words when able revealed HMRC had "assumed" I was still being paid as a regular and had taken it upon themselves to correct the situation. Code now restored to reflect full allowance and deficit recovered. It's a minefield. No apology offered either!