PILON

[PILON]

Would appreciate any legal/HR advice regarding PILON deductions.

I am aware that tax/NI are deductible. Are pension payments also deductible if I was dismissed for health reasons with immediate early release of local authority pension?

Pension payments - all pension payments - are classed as taxable income in the same way as other income. So if your pension and all income is more than your personal allowance then you will pay tax on it. NI isn't payable on pension income, but I believe that from next year pension income will count as income for the social care tax.

Thanks for responding. Perhaps my question was unclear ….I meant should pension contributions be deducted when my position was terminated due to sickness and my pension released?

I am struggling to understand why I would need to make a further pension contribution when I am now in receipt of that pension (awaiting first payment).

I don’t know what you mean by “pension was released”. I would expect a PILON payment to be the same as a regular payment, with all the usual deductions.

I would expect you to pay pension contributions on PILON. Once the final figures go through to your pension provider they will recalculate your pension payments and you will be given a new rate plus back pay. I would expect it to take a couple of months to resolve.

WRT the Health & Social Care Levy, I don’t believe you pay it on pension income. My understanding is that if you are employed but over pension age, so don’t pay NI, you would have the Levy deducted on any earnings.m

If you were in the Local Government Pension Scheme then you should not have had pension contributions deducted from PILON. Regulation 20 (2)(d) of the Local Government Pension Scheme Regulations 2013 states that pensionable pay does not include ‘any payment in lieu of notice to terminate a contract of employment’.

The fact that you retired on ill health is irrelevant, the same would apply whatever the reason for leaving/paying the PILON.

However, you should check if the value of the PILON was taken into account in the calculation of your pension benefits - if it was then you may want to think about whether it is in your interests to raise this as an issue, as including the PILON may well have increased your final pensionable pay/service and therefore have increased your pension benefits. However, if they have deducted pension contributions from your PILON but then not taken it into account in your pension calculation then you definitely need to raise it!!