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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15917
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I'm 60 years old in 2 months. I will be in receipt then of a

Resolved Question:

I'm 60 years old in 2 months. I will be in receipt then of a British Coal pension which is some £440/week. I currently work earning circa 42K with a company car. I'm in work defined contribution scheme current pot circa 120K, pay in 4.5% company pays in 9%. what can I do to reduce tax liability from the British Coal pension?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.


Short of retiring now, all you can do to reduce your taxes overall is to either increase your contributions to your current company pension scheme or sacrifice salary and have your employer make direct contributions into the pension plan. You would need to check with a pension adviser that you would not be in danger of breaching the lifetime pension allowance which is currently £1 million and which may reduce further in future. Your BC pension is £22,880 per annum. It's lifetime value is £457,600 (20 time £22,880). Take a look here for information on the lifetime pension allowance.

You will be paying tax at 40% on a large piece of your BC pension (40% tax starts at an income level of £43,000) so you have some way to go to not be paying any tax at 40%. Whether your employer's pension scheme will allow additional contributions is something you will have to determine by contacting the scheme trustees.

There are high risk investment vehicles which give generous tax reliefs but these are aimed at those who have money they are prepared to lose in pursuit of the tax reliefs and big returns and which are not appropriate for most of us.

I hope this helps but let me know if you have any further questions.

Customer: replied 1 year ago.
Are you saying I could use the BC pension, c 23K/annum, to pay additional sums into company pension scheme? effectively use my present company pension as a savings fund to miss paying 40% tax on the BC pension and defer any tax until I withdraw funds from the pension. with pot growth and additional funds it shouldn't grow from present size, 120K, to impact on LTA.
Expert:  TonyTax replied 1 year ago.

No, I'm not saying that. Pension income is not pensionable but the tax you pay on it is determined by other income levels.

What I'm saying that is you could pension more of your current salary than you are at present. As I said, you would need to pension a significant proportion of your salary in order to not being paying 40% tax on part of your income at all.

TonyTax and 2 other Tax Specialists are ready to help you
Customer: replied 1 year ago.
understand what you are saying. thanks for your help now off to find if can pay more from my salary into my employers pension fund.
Expert:  TonyTax replied 1 year ago.


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