Can anyone advise on UK state pension lump sums please?

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Mo Reardon

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Feb 24, 2024, 2:41:47 AM2/24/24
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Hi All,

1. My husband and I are planning to take our lump sums of UK State pensions in July 2024 which we have deferred since 2011 and 2012 years. Do you know how to legally minimise ATO tax on these?  We can't add any more funds to our SMSF.

2. If DWP make International Payments direct to an OZ bank are made do you know how good the exchange rate is they use?

3. I know the regular pensions aren't taxed in UK, just in Australia but what about the Lump sums? If taxed in the UK at a higher rate than Australian tax would be can we get a tax refund?

4. Do Graduated Pensions count towards the UPP?

5. I made voluntary contributions from Australia of 13 years to make up my 17 years to the 30 and husband made 10. Is this likely to give a UPP calculation of more than the 8%?

6. Does requesting the lump sum taken in July 2024 be treated as earned since 2011 and 2012 give preferential tax treatment over just paying it as if earned in 2024-2025 with the revised stage 3 tax cuts? I don't believe we have entered a higher tax bracket than 19c  and most years taxable income < $37000 each. I realise this would be a very complex calculation though.

7. I believe if we haven't taken the 8% UPP we can apply 3 years   i.e. 24% to the lump sum if we take it as all taxable in 2025?

 

If you are unable to answer these questions please do you know good accountant who is knowledgeable about these things please?

Many thanks

Mo and Tony  Reardon

 

Gary Rees

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Feb 24, 2024, 3:18:10 AM2/24/24
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Mo

Are you saying that you can claim a lump sum on the UK State pension, as that is news to me, can you clarify that please.


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On 24 Feb 2024, at 15:41, Mo Reardon <m...@sir.com.au> wrote:


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elle...@gmail.com

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Feb 24, 2024, 4:43:29 AM2/24/24
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Hi Mo and Tony

I’m an accountant,  not a tax / pension specialist but having been doing a lot of research into these areas for myself.

I’d be very interested in any other educated answers you get, some of the assumptions seem strange to me.

 

2 – I’ve heard this is a very good / best way to do it

3- regular pension is taxed in UK – but not if you’re not a tax resident. Same with lump sums (I assume)

5 – I doubt it – 8% is normally good – what rate did you pay at ?

6 – I had no idea / have never heard of the ATO apportioning lump sums over many years – any references for this ?

7 – no. 8% of each year or total, only 8% (interesting maths 😃 )

 

Interested in other peoples thoughts or experiences.

Cheers

Ellen

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Mo Reardon

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Feb 24, 2024, 4:43:55 AM2/24/24
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Gary,

If you defer taking your pension after retirement age not only does it continue to be indexed but when you do commence your pension you have an option to take a lump sum of the deferred amount or an increased weekly pension. As we both have recently been diagnosed with cancer the lump sum seems a good choice.

Cheers Mo

 

From: 'Gary Rees' via BAPA [mailto:bapa...@googlegroups.com]
Sent: Saturday, February 24, 2024 6:57 PM
To: bapa...@googlegroups.com
Subject: Re: [bapanews] Can anyone advise on UK state pension lump sums please?

 

Mo

 

Are you saying that you can claim a lump sum on the UK State pension, as that is news to me, can you clarify that please.

 

 

Sent from my iPhone



On 24 Feb 2024, at 15:41, Mo Reardon <m...@sir.com.au> wrote:



Hi All,

1. My husband and I are planning to take our lump sums of UK State pensions in July 2024 which we have deferred since 2011 and 2012 years. Do you know how to legally minimise ATO tax on these?  We can't add any more funds to our SMSF.

2. If DWP make International Payments direct to an OZ bank are made do you know how good the exchange rate is they use?

3. I know the regular pensions aren't taxed in UK, just in Australia but what about the Lump sums? If taxed in the UK at a higher rate than Australian tax would be can we get a tax refund?

4. Do Graduated Pensions count towards the UPP?

5. I made voluntary contributions from Australia of 13 years to make up my 17 years to the 30 and husband made 10. Is this likely to give a UPP calculation of more than the 8%?

6. Does requesting the lump sum taken in July 2024 be treated as earned since 2011 and 2012 give preferential tax treatment over just paying it as if earned in 2024-2025 with the revised stage 3 tax cuts? I don't believe we have entered a higher tax bracket than 19c  and most years taxable income < $37000 each. I realise this would be a very complex calculation though.

7. I believe if we haven't taken the 8% UPP we can apply 3 years   i.e. 24% to the lump sum if we take it as all taxable in 2025?

 

If you are unable to answer these questions please do you know good accountant who is knowledgeable about these things please?

Many thanks

Mo and Tony  Reardon

 

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Gary Rees

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Feb 24, 2024, 5:30:23 AM2/24/24
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Mo,

Well that’s interesting, sorry to hear about the Cancer diagnosis, I hope you both get good treatment and crack on and beat it.

Good luck

Sent from my iPhone

On 24 Feb 2024, at 17:44, Mo Reardon <m...@sir.com.au> wrote:



mary barber

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Feb 24, 2024, 6:53:42 PM2/24/24
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If this helps I get very little pension but they send it to my account with Xe & then organise  an exchange rate to send to bank in Australia. You can not keep money in Xe. You could email or ring them in Australia No charge & good rates better than banks



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Sent: Saturday, February 24, 2024 8:43:02 PM
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vivienne bentley walker

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Feb 25, 2024, 3:38:57 AM2/25/24
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Hello Mary
What's Xe please, I thought all international transactions with the DWP went through city bank as ours does 🤔

To view this discussion on the web visit https://groups.google.com/d/msgid/bapanews/ME2P282MB0435D647D5EEB032F671B3F694542%40ME2P282MB0435.AUSP282.PROD.OUTLOOK.COM.

Mo Reardon

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Feb 25, 2024, 3:40:37 AM2/25/24
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Hi Ellen,

Many thanks for all those useful thoughts.

My apportioning lump sum information comes from this ATO advice on completing the tax form:

"Reporting a lump sum payment in arrears You will need to include any lump sum payment in arrears amount you receive in your tax return in the income year you receive the payment. You will also need to provide a breakdown of the payment into each income year. Report the payment in your tax return at Lump Sum E." It does also state this applies to pension lump sums.

How I find out from DWP the breakdown of payment into each income year has me puzzled though! I guess it is possible to work out the standard UK base pension and the calculation of increases that deferring it would have given for each year but far from an easy calculation.

I'll let you know what I find out.

Thanks again,

Cheers Mo

Mo Reardon

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Feb 25, 2024, 3:41:01 AM2/25/24
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Hi Mary,

Many thanks for that. I use Xe and their rates are excellent and far better than banks. The DWP claim that if they pay directly into an Australian bank account " you will benefit from competitive exchange rates based on bulk buying of currency". I plan to call DWP on Monday and ask them their current exchange rate then I can compare with the Xe rate but whether anyone there will know I somehow doubt.

Cheers Mo





Hi All,

1. My husband and I are planning to take our lump sums of UK State pensions in July 2024 which we have deferred since 2011 and 2012 years. Do you know how to legally minimise ATO tax on these?  We can't add any more funds to our SMSF.

2. If DWP make International Payments direct to an OZ bank are made do you know how good the exchange rate is they use?

3. I know the regular pensions aren't taxed in UK, just in Australia but what about the Lump sums? If taxed in the UK at a higher rate than Australian tax would be can we get a tax refund?

4. Do Graduated Pensions count towards the UPP?

5. I made voluntary contributions from Australia of 13 years to make up my 17 years to the 30 and husband made 10. Is this likely to give a UPP calculation of more than the 8%?

6. Does requesting the lump sum taken in July 2024 be treated as earned since 2011 and 2012 give preferential tax treatment over just paying it as if earned in 2024-2025 with the revised stage 3 tax cuts? I don't believe we have entered a higher tax bracket than 19c  and most years taxable income < $37000 each. I realise this would be a very complex calculation though.

7. I believe if we haven't taken the 8% UPP we can apply 3 years   i.e. 24% to the lump sum if we take it as all taxable in 2025?

 

If you are unable to answer these questions please do you know good accountant who is knowledgeable about these things please?

Many thanks

Mo and Tony  Reardon

 

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Annie Cory

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Feb 25, 2024, 4:28:49 AM2/25/24
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Services Australia/Centrelink send details of interest rates charged to me once a year usually in February. 

On 25 Feb 2024, at 18:41, Mo Reardon <m...@sir.com.au> wrote:



Marianne

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Feb 26, 2024, 2:42:04 AM2/26/24
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Wise has a way better rate the XE and you can open an account to keep the money in and get a visa type card to spend in any country.

elle...@gmail.com

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Feb 26, 2024, 2:43:37 AM2/26/24
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Hi Mo

I think all that refers to lump sums that are typically backpay from employers. I’m not sure yours would be a lump sum E. You chose to defer the payment. Very interesting. I’m doing a tax course at the moment, I’ll try and pop this question in 😃 . I’ll do some research and pls let me know if you find out anymore (apologies to everyone else for having to read this !)

elle...@gmail.com

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Feb 26, 2024, 2:44:19 AM2/26/24
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Hi Mo

 

I think you’re right, you should be able to get a tax offset which makes the lump sum taxable as if it were paid in previous years. Interesting, nice one.
Ellen

 

https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/tax-offsets/lump-sum-payment-in-arrears-tax-offsets

 

To qualify for a lump sum tax offset, your lump sum payment in arrears must be either:

Blah blah blah

  • deferred payment of a retiring allowance, retirement pension or annuity (or supplement)
  •  

Marcus Wigan

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Feb 26, 2024, 4:44:23 AM2/26/24
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Ellen, I have had 2+ years of my Civil Service Pension as a Principal completely withheld by CSP, I plan to make the claim if I ever get what I am owned as a series of annual delayed lump sum payments over the 23 years it has been withheld… its quite significant- but I haven’t got a cats chance in hell of ever getting it.. the UK civil service is even worse than the government and its frozen pension nonsense from a fully funded pension(check you will find it was)

Cheers and good luck let us know if you get your due

Marcus

Richard Denton

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Feb 26, 2024, 2:12:13 PM2/26/24
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I used still use Wise right from the get go when they were named Transfer Wise. Excellent service.  No complaints whatsoever
Richard
Sent from my iPhone 13

On 26 Feb 2024, at 6:42 pm, 'Marianne' via BAPA <bapa...@googlegroups.com> wrote:

 Wise has a way better rate the XE and you can open an account to keep the money in and get a visa type card to spend in any country.

mary barber

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Feb 26, 2024, 8:01:30 PM2/26/24
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Good luck with that ???? be interested to  see the reply. Also Australian banks also make a charge  I I found in the past it was Westpac rate you got ??? cheers andra

Ps some people are  using wise as it is better I may look into that but it took 2 months to get XE to do in with out me sending from my bank 1st as Barclays closed my account with out telling me as they won’t let you have an account if you live overseas with out aUK address.

Marcus Wigan

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Feb 27, 2024, 12:51:18 AM2/27/24
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I’ve been using OFX for some of my small pensions as they can handle the audit requirements of sone of the more crusty parts of uk financial institutions like lloyds bank and Scottish Widdows

The most useful aspect was and is for getting payments into the sclerotic us banking system! 

As an 80 + I can no longer get any insurance fir USA even with cutouts fir almost anything so that invaluable aspect as it was is no longer useful

But if you need it it’s fast and economic

Marcus Wigan
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On 27 Feb 2024, at 06:12, 'Richard Denton' via BAPA <bapa...@googlegroups.com> wrote:

I used still use Wise right from the get go when they were named Transfer Wise. Excellent service.  No complaints whatsoever

Marcus Wigan

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Feb 27, 2024, 1:47:41 AM2/27/24
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Mary a couple of suggestions.. try OFX they are pretty good, and also can get rapid cash to from USA in spite of the appalling US banking systems! Their rates are good and the service is normally very good as well..
Ive never tried wise or xe, but Id be amazed if OFX can’t set you up very quickly! Ive used them for a long time.. one irony is that they use Barlays as the ir route through GBP (with their own exchange rates.. Barclays shut my account down as well.. but you can probably get a sterling area account from Barclays in the Channel Islands- that what I did when the mainland branch shut me down.

This list is pretty useful for sharing experiences with the UK!

I am awaiting Wokingham Council confirming my vote again… and will use it to campaign in the next UK election of course.. I hope everyone does.

cheers

Marcus Wigan

mary barber

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Feb 27, 2024, 8:16:37 PM2/27/24
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I managed to arrange with XE that they would let UK pensions pay my pension into their account with my reference number. Bit if hic cup 1st quarter but should be  good in march. Didn’t know about Channel islands but understood from other UK banks you have to be there in person to open an account. You must be joking in this day of internet banking.!!!

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