Private pension AND working full time

[Middlechild3]

I very recently took VR from a job I disliked age 59 and triggered my private pension to start in a few months when I'm 60. I hadn't planned to retire as such but didn't think I'd get another ft job easily at my age. I've had more interest than I thought and have interviews coming up. Is there anything to be aware of in having private pension income AND full time salary coming in apart from being aware the combination may push into a higher tax bracket? Do I need to do anything, i.e. HMRC etc. I'm just not ready to retire properly before anyone asks.

How are you taking the private pension? If drawdown, you will trigger the MPAA which will restrict contributions into your new employers pension (if you opt in) to £10K pa.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise Book a free call with pension Wise- they are brilliant and will tell you exactly what the effects are.

One thing I believe will change is that once you are withdrawing taxable money (ie anything over the tax free amount) from a pension your annual allowance for paying into a pension drops to £10k, in order to prevent recycling.

But definitely talk to Pension Wise who will know for sure and will be able to advise on how taking pension now may affect the longer term.

I say private pension as it's not the government pension. It's a civil service pension defined benefit pension. I just had a look at pension wise and they'll only advise on defined contribution pensions. I had a financial advisor to do a review when considering VR, my VR money and pension lump sum are being used tax efficiently. Would an accountant maybe be the person to contact if I now land a full time job? This makes me sound far richer than I am by the way, happy to take the higher tax bracket hit if combined income goes into this territory but don't want any nasty surprises or tax bills!

As I understand it things can get messy if you're paid a Civil Service Pension and take another job in the Service.

Other then that your issue is, as you say, being liable to higher rate tax. I left the Service on voluntary terms in 2013 with an immediate unreduced pension as part of the deal. I work part time for a Charity and now find that increases in the pension and frozen tax thresholds mean I'm paying a small amount of tax in the 40% band. Never got near that during my fist career!!

I guess you could look at putting money from you full time job into a DC pension.

Or can you defer the CS one?

If you’re getting your civil service pension before state pension age, is that because you’ve paid to take your pension some years early?

If you’re allowed to pay into a DC pension that could be a good workaround

Pension age for the CS pension (Alpha?) is now matched to State Pension age.

However at the time that came in there were concessions for those already pushing 60, or maybe even just over 50. to retain 60 as their payment date. A friend who is 60 later this year missed out on that by a narrow margin.

I think there is also an option to take years in the old Classic/Classic Plus or Premium schemes to take years 'banked' in those at 60.

I may be wrong though; just glad I got out when I did!!

Do you need the additional income that you're receiving from the pension? If not, you could consider making new contributions into a DC pension scheme while you're still working, claiming the tax relief and perhaps bringing you below the Higher Rate threshold.

I'm not taking the DB pension early, It starts at 60 which I am in a few months. The papers have been sent to trigger this as there's nothing to be gained by deferring. I also have a DC pension with the same former job (we had to switch) I have no plans to take that yet as it would be actuarially reduced if accessed before 67 ( a chunk of VR money went into this to boost it and avoid tax) although I may take this at say 65.

My civil service defined benefit pension is age 60,
My civil service defined contribution pension Alpha is age 67.
Having taken VR I've been told I can't work for the civil service again for 6 months. (I'm not trying to).

In that case - you don’t need to do anything. Id suggest continuing to pay into a new pension once you start your new job as that will decrease your taxable income. Id also suggest looking at setting up a savings account to pay the excess income into whilst you’re still working - Im a teacher and I did this at 59, continued working FT for 2 years and paid all my pension into an ISA during that time. I then reduced my working days and now earn as much as I will receive when I get my state pension at 66. I’ve got healthy savings plus am able to live well on what I will have coming in once I fully retire at 66.

Alpha is not a defined contribution pension, it’s defined benefit just on different terms to the previous iterations.

I have exactly the same situation. I have a DB pension which triggered at 60 from a previous (private sector) employer but also unexpectedly found myself back in part time employment. It's not really causing any problems - although initially the HMRC got very confused and messed up my tax codes so that I had zero tax allowance for my part time employment (which brings in more than the pension) basically meaning that I overpaid tax hugely for the first year. It's all sorted now although I did have to get my accountant involved. You may also need to complete a self assessment tax return as you have two income streams, at least initially.

This ^. If you got advice on the basis of Alpha being defined contribution, you might want to double check the advice is accurate, as Alpha is defined benefit.

The civil service defined contribution scheme is called Partnership and ive only ever known it be really used by people who already have big DC schemes and are coming into the CS late in their careers.

No it's my mistake, I just know it's less favourable terms than my main one.

I’d give the MyCSP helpline a call to check whether receiving your Premium pension affects anything in relation to Alpha. IME financial advisors aren’t always clued up on the CSP.

As above, My CSP would be one point of call. Possibly the Union if you were in one.

I was let down by HR's lack of knowledge of how the 'dynamisation' process that determines how final salary for pension purposes is calculated. Got about £5k less in yr one as I had to be 55 to benefit.

maybe consider to do a part time?

The pension side is completely sorted, I've already spoken to MYCSP at length several times, my FA was chosen as they are familiar with civil service pensions. It's done, I know what's what re my pension/s. I just wanted to know if there is anything to look out for when also getting employment income as well as pension income, aside from being aware it may push you into the higher tax bracket. A couple of posters above have been in this position which has been informative. Re full time, part time. I'm in the lucky position of being able to apply for different jobs I've always fancied trying, some are full time, some part time. The one I really want is full time. I'm just not ready to retire yet mentally. Thanks all, some stuff to think about. I think I may need to use an accountant as and when successful in getting another role, at least this financial year until things settle.

There’s no need for an accountant. HMRC will issue tax codes to both your pension scheme and your employer and you will be taxed accordingly. Any over or underpayments will usually be ironed out at the end of a tax year but if it is obvious that you are paying too much tax, you can fill in a form to claim this back.

If this is not picked up by HMRC automatically you will get a tax charge when you complete a self assessment tax return. Worth working out the tax liability yourself so you can put aside enough if is not taken as PAYE

@Middlechild3 the only thing to be aware of is if it is another CS job. If not you are fine it’s just the tax.

I assume the CS pension will be large enough to consume all of your Personal Allowance for Income Tax so work earnings will, unless they take you into Higher Rate territory, be taxed at the basic rate.

If you've you've a P45 from the CS then hand that to the new employer. If no P45 then, if I remember correctly, there's some sort of checklist the employer will complete with you as part of 'onboarding'. That includes the opportunity to show your allowance is used against other income.

The only reason I suggested an accountant @messybutfun is that the HMRC were absolutely useless in helping me and were content to let me keep on paying too much tax for the rest of the tax year. They are much more helpful when a professional gets involved in my experience.