Pension

The enhanced Check Your State Pension forecast service is now available online. The service can be found on GOV.UK at the following webpage https://www.gov.uk/check-state-pension.

The new digital service is a joint service by HM Revenue and Customs (HMRC) and the Department for Work and Pensions (DWP). It has been enhanced to include a fully end-to-end digital solution.

The service allows most people under State Pension age to view their pension forecast and identify any gaps in their National Insurance Contributions (NICs) record. This will be helpful for taxpayers looking to make voluntary NIC contributions to increase their entitlement to benefits, including the State or New State Pension.

Usually, HMRC allow you to pay voluntary contributions for the past 6 tax years. The deadline is 5 April each year. However, there is currently an opportunity for people to make up gaps in their NICs for the tax years from April 2006 to April 2017 as part of transitional measures to the new State Pension. The deadline has been extended a number of times and has been most recently extended until 5 April 2025.

The launch of HMRC’s online service will help speed up this process. HMRC’s helplines have been struggling to meet the demands for information and processing claims to pay additional NIC contributions.

HMRC has also confirmed that all relevant voluntary NIC payments will be accepted at the rates applicable in 2022-23 until 5 April 2025.

It is worthwhile checking your State Pension position on a regular basis, this will help to optimise your entitlement. You should also consider what other savings or pensions might be required for a long and comfortable retirement.

You can usually claim tax relief on private pension contributions worth up to 100% of your annual earnings, subject to the overriding limits. Tax relief is paid on pension contributions at the highest rate of income tax paid.

This means that if you are:

• A basic rate taxpayer, you get 20% pension tax relief.
• A higher rate taxpayer, you can claim 40% pension tax relief.
• An additional rate taxpayer, you can claim 45% pension tax relief.

The first 20% of tax relief is usually automatically applied by your employer with no further action required if you are a basic-rate taxpayer. If you are a higher rate or additional rate taxpayer, you can claim back any further reliefs on your self-assessment tax return.

The above applies for claiming tax relief in England, Wales or Northern Ireland. There are some regional differences if you are based in Scotland.

There is an annual allowance for tax relief on pensions of £60,000. This limit remains unchanged in the new 2024-25 tax year. There is also a rule that allows you to carry forward any unused amount of your annual allowance for three tax years.

The lifetime limit for tax relief on pension contributions was removed with effect from 6 April 2023 and has now been abolished.

Automatic enrolment for workplace pensions has helped many employees make provision for their retirement, with employers and government also contributing to make a larger pension pot.

The law states that employers must automatically enrol workers into a workplace pension if they are aged between 22 and State Pension Age, earning more than the minimum earning threshold. The minimum threshold is currently £10,000 and will remain the same in 2024-25. The employee must also work in the UK and not be a member of a qualifying work pension scheme. Employees can opt-out of joining the pension scheme if they wish.

Under the rules, employers are also required to offer their workers access to a workplace pension when a change in their age or earnings makes them eligible. This must be done within 6 weeks of the day they meet the criteria.

Under the automatic enrolment rules the employer and the government also add money into the pension scheme. There are minimum contributions that must be made by employers and employees.

Both the employer and employee need to contribute. There is a minimum employer contribution of 3% and employee contribution of 4%. This means that contributions in total will be a minimum of 8%: 3% from the employer, 4% from the employee and an additional 1% tax relief.

The contributions are based on the qualifying earnings brackets highlighted above; this means that for many employees the 8% contribution rate will not be based on their full salary.

Private pensions can be an efficient way to pass on wealth, but it is important to consider what, if any, tax will be payable on a private pension you inherit. The person who died will usually have nominated you by telling their pension provider that you should inherit any monies left in their pension pot. If the nominated person can’t be found or has since died, the pension provider may make payments to someone else instead.

In general, if you inherit a private pension and the owner of the pension fund died before the age of 75, the benefits left in a private pension can be paid as a lump sum or drawdown income to you, with no tax to pay. If the deceased passed away after the age of 75 the pension will be taxed at your marginal income tax rate, so 20% if you are a basic rate taxpayer or 40% if you are in the higher tax bracket and 45% if you pay tax at the top rate. The rates may differ if you are a Scottish taxpayer.

There are restrictions on pensions from a defined benefit pot (usually workplace pensions) whereby the pension can only be paid to a dependant of the person who died, for example a husband, wife, civil partner or child under 23. This rule can sometimes be changed if the pension fund allows, but the inheritance will be taxed at up to 55% as an unauthorised payment.

The rules on inheriting a pension are complex and depend on what type it is and how old the holder was when they died. There are also important time limits that must be followed.

Pension Credits can provide extra income to those over State Pension age and on a low income. The credits were first introduced in 2003 to keep retired people out of poverty. 

Pension Credit can top up:

• your weekly income to £201.05 if you are single; or
• your joint weekly income to £306.85 if you have a partner.

If your income is higher, you might still be eligible for Pension Credit if you have a disability, you care for someone, you have savings or you have housing costs. Not all benefits are counted as income.

Claimants who submit a Pension Credit before 10 December 2023 could be entitled to an extra £300 cost of living boost, on top of support worth an average of £3,900 per year. This is because successful Pension Credit claims can be backdated for up to three months, as long as the applicant was also eligible to receive it during that time. HMRC estimates that there are many pensioners entitled to the credit who have not yet made a claim. 

Details of how to make an application for Pension Credit can be found on GOV.UK at https://www.gov.uk/pension-credit/how-to-claim 

Minister for Pensions Paul Maynard said:

'We want every pensioner to receive all they help they can and with time ticking down to deadline day and the window drawing to a close, now’s the perfect time to check out our Pension Credit calculator and make sure you or your loved ones aren’t missing out on this vital support. In many cases, it’s an open goal to more money in your pocket.'

Recipients of Pension Credits will automatically get cold weather payments and are also eligible to apply for a free TV licence if they are aged 75 or over.

Taxpayers can usually claim tax relief for their private pension contributions. There is an annual allowance for tax relief on pensions of £60,000 for the current 2023-24 tax year. The annual allowance was £40,000 in 2022-23.

There is a three year carry forward rule that allows you to carry forward any unused amount of your annual allowance from the last three tax years if you have made pension savings in those years. There used to be a lifetime limit for tax relief on pension contributions, but this was removed with effect from 6 April 2023.

You can qualify for tax relief on private pension contributions worth up to 100% of your annual earnings, subject to the overriding limits. Tax relief is available on pension contributions at the highest rate of Income Tax paid by the person making the contributions.

This means that if you are:

• a basic rate taxpayer you get 20% pension tax relief;
• a higher rate taxpayer you can claim 40% pension tax relief; and
• an additional rate taxpayer you can claim 45% pension tax relief.

The first 20% of tax relief is usually automatically applied by your employer with no further action required if you are a basic-rate taxpayer. If you are a higher rate or additional rate taxpayer, you can claim back any further reliefs on your Self-Assessment tax return.

The above applies for claiming tax relief in England, Wales or Northern Ireland. There are regional differences if you are based in Scotland.

Ever had a nagging feeling that you have a pension pot somewhere but have no idea how to track it down?

Well, there is a solution.

There is a search link on the GOV.UK website at https://www.gov.uk/find-pension-contact-details that will help.

The service will help you find contact details to search for a lost pension by tracking down contact details for:

• your own workplace or personal pension scheme; or
• someone else’s scheme if you have their permission.

This service will not tell you whether you have a pension, or what its value is, and you will need the name of an employer or a pension provider to use this service.

If this line of enquiry fails, you could also request contact details from the Pension Tracing Service by phone or by post.

Pension Tracing Service

Telephone: 0800 731 0193
From outside the UK: +44 (0)191 215 4491
Textphone: 0800 731 0176
Relay UK (if you cannot hear or speak on the phone): 18001 then 0800 731 0193
British Sign Language (BSL) video relay service if you’re on a computer – find out how to use the service on mobile or tablet. Monday to Friday, 10am to 3pm.
 

You could also write to The Pension Service at:

Post Handling Site A
Wolverhampton
WV98 1AF
United Kingdom

You can usually claim tax relief for your private pension contributions. There is an annual allowance for tax relief on pensions of £60,000 for the current 2023-24 tax year. The annual allowance for 2022-23 was £40,000.

You can claim tax relief on private pension contributions worth up to 100% of your annual earnings, subject to the overriding limits. Tax relief is paid on pension contributions at the highest rate of Income Tax paid.

This means that if you are:

• a basic rate taxpayer you receive 20% pension tax relief;
• a higher rate taxpayer you can claim 40% pension tax relief; and
• an additional rate taxpayer you can claim 45% pension tax relief.

There are two kinds of pension schemes where you receive relief automatically. Either:

• your employer takes workplace pension contributions out of your pay before deducting Income Tax; or
• your pension provider claims tax relief from the government at the basic 20% rate and adds it to your pension pot (‘relief at source’).

If you are a higher rate or additional rate taxpayer, you can claim back any further reliefs you are entitled to on your Self-Assessment tax return. You may also need to make a claim if your pension scheme is not set up for automatic tax relief or if someone else pays into your pension.

There is a three year carry forward rule that allows you to carry forward any unused amount of your annual allowance from the last three tax years; if you have made pension savings in those years. (There used to be a lifetime limit for tax relief on pension contributions, but this was removed with effect from 6 April 2023.)

The above applies for claiming tax relief in England, Wales or Northern Ireland. There are regional differences if you are based in Scotland.

You can usually claim tax relief for your private pension contributions. There is an annual allowance for tax relief on pensions of £60,000 for the current 2023-24 tax year. The annual allowance was £40,000 in 2022-23.

There is a three year carry forward rule that allows you to carry forward any unused amount of your annual allowance from the last three tax years if you have made pension savings in those years. There also used to also be a lifetime limit for tax relief on pension contributions but this was removed with effect from 6 April 2023.

You can qualify for tax relief on private pension contributions amounting to 100% of your annual earnings, subject to the overriding limits. Tax relief is paid on pension contributions at the highest rate of Income Tax paid by the contributor.

This means that if you are:

• A basic rate taxpayer you get 20% pension tax relief.
• A higher rate taxpayer you can claim 40% pension tax relief.
• An additional rate taxpayer you can claim 45% pension tax relief.

The first 20% of tax relief is usually applied by your employer with no further action required if you are a basic-rate taxpayer. If you are a higher rate or additional rate taxpayer, you can claim back any further reliefs on your Self-Assessment tax return.

The above applies for claiming tax relief in England, Wales or Northern Ireland. There are regional differences if you are resident for Income Tax in Scotland.

If you are retiring abroad, you are still entitled to claim your UK State Pension as long as you have built up a suitable amount of qualifying years of NIC contributions. However, your entitlement to yearly increases in the State Pension only apply in certain countries. 

The increases only apply if you live in:

• The European Economic Area (EEA) or Switzerland.
• A country that has a social security agreement with the UK that allows for cost of living increases to the State Pension. Note, the UK has social security agreements with Canada and New Zealand, but you cannot get a yearly increase in your UK State Pension if you live in either of those countries.

If you do not qualify for the annual increase in the State Pension but move back to the UK then your pension will revert to the current rate.

If you are living abroad, you must be within four months of your State Pension age to claim.

To claim your pension, you can either:

• contact the International Pension Centre; or
• send the international claim form to the International Pension Centre (the address is on the form).

You can elect to have your pension paid into a UK or foreign bank account. There are also tax implications that need to be considered. If your country of residence does not have a double taxation agreement with the UK, you may pay tax in both places.