Pensions And Tax

Do I have to pay tax on my basic state pension?

When you receive your basic state pension, it is taxable. At the same time, you have a personal allowance, which is an allowance that you can earn up to without having to pay tax. For many people, the basic state pension may fall below their personal allowance.

Do I have to pay tax on a personal stakeholder pension?

Personal pensions are taxable. They form part of your income tax allowance. So if the pension pays in excess of that allowance, it will be subject to basic or higher rate tax depending on your tax bands.

How does The Lifetime Allowance LTA work?

Because the government gives tax benefits when you put money into pensions, they're quite keen to cap the extent of those benefits so that they don't go bankrupt. The way that they do that is they cap how much you can put into pensions over the course of your life until you retire, so that when you retire, the money can't be inaccessible. It's called a Lifetime Allowance, a cap on your total pension funds, whether it's occupational, personal, or state quarter. At the moment, that allowance is 1.6 million pounds and it increases each year. That's a lot of money, so it won't affect most people, but if you are putting in big pension contributions, you need to bear in mind, particularly if that money's going to sit twenty or thirty years before you take it, then it may breach the lifetime allowance. If it does, you have to pay a very high level of tax on the excess.