Planning Your Retirement - THE LOCAL GOVERNMENT PENSION ...

Income Tax andyour PensionYour LGPS pension is taxable,but your lump sum is tax-free.Whether you pay tax when youretire depends on the amount ofyour pension and your personalcircumstances including:• whether you are going to workagain or have other income• whether you have any incomefrom savings and investments• how old you areWhen you RetireTax form P45 is a statementshowing your current tax code,pay and tax details to date thatan employer normally gives anemployee on leaving work.When you retire on an immediateoccupational pension you onlyget a copy of your P45. Youremployer has to forward tax formP45 directly to the Fund wherethe Payroll Section applies yourappropriate tax code against yourpension under a special temporaryarrangement which does not permitany tax refunds. This is becausethe tax office needs to re-assessyour tax code to take account ofany income and any changes inyour personal circumstances.On behalf of the tax office, theFund will send you a tax formP161 that you should completepromptly and forward directly tothe tax office. Once your tax codeis re-assessed, the tax office notifiesyou and the Fund of your new taxcode and any tax refund due ispaid with your LGPS pension.What counts as IncomeIncome is subject totax and can include:• your LGPS pension and anyother occupational pension• state pensions• your earnings if you work again• interest from investments• Jobseekers allowance• Incapacity BenefitThe tax office needs to know yourincome from all sources and yourpersonal circumstances in order toassess your tax allowance. Your taxallowance is offset against your totalincome and tax is due on the rest.As tax is not deducted from anystate pension or benefit, any tax dueis likely to be collected through yourLGPS pension. So it is importantyou fill in Form P161 and send it tothe tax office as soon as possible.36