Many years ago I worked for a Local Authority. I had forgotten about any pension due to me from them, but they belatedly contacted me in order to pay it.
Their first payment included a substantial lump sum covering from my scheme retirement date in 2006 until now and appears to have been taxed at around 27% (the payment advice shows emergency code 1185L M1).
If – hypothetically - I were paying tax near the top of basic rate, the lump sum would largely still be taxed at higher rate. But if this payment had been an insurance bond surrender or similar ‘chargeable event’, I could claim top-slicing relief.
Since the pension lump sum is in lieu of regular (basic-rate) payments over many years, is there any equivalent to top-slicing relief available?
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Pension - deferred payment in a lump sum
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- Lemon Half
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Re: Pension - deferred payment in a lump sum
stewamax wrote:Since the pension lump sum is in lieu of regular (basic-rate) payments over many years, is there any equivalent to top-slicing relief available?
You might be able to persuade your Tax Office to reopen the calculations for previous years and add the income as it accrued in previous years. That's only going to be useful if in any of the years you were a 0% (below personal allowance) or 40% tax payer, or if you get artificially pushed into the 40% bracket.
The other idea is to go back to the previous employer and ask them to treat you as a late retirement. Perhaps you are too late to be able to do this.
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- Lemon Quarter
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Re: Pension - deferred payment in a lump sum
stewamax wrote:Many years ago I worked for a Local Authority. I had forgotten about any pension due to me from them, but they belatedly contacted me in order to pay it.
Their first payment included a substantial lump sum....
Have a look at https://www.gov.uk/hmrc-internal-manual ... l/eim74103 . You will need to get the scheme to provide you with an analysis of when the payments should have been made. The PAYE treatment is correct, but that's only PAYE - HMRC should correct the position if you inform them.
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