Calculation of tax on state pension and occupational pension

O

Orga

Registered User
Messages
364
Hi.

Just wanted to check with some of the wiser heads here about my example below and if the calc is correct.

The basic question is: are those in receipt of state pensions in addition to an occupational pension benefiting from more favourable tax treatment than those who do not have a state pension as part of their income?

Scenario is retired person aged >70, occupational pension €45k, state pension in addition €12k, SRCOP €32k, am omitting tax credits from the calc. As they currently pay tax:

32k-12k=20k= actual SRCOP applied to their income
tax = 20k@20% + 25k@41% = €14.25k tax

BUT if the state pension were taken as part of the income:
total income = €57k
tax = 32k@20% + 25k@41% =€16.65k

So, under the current tax regime they are aprox 2.5k better off annually..is this right?
 
Maybe I'm mis-calculating..am basing it on a P60 I saw recently...I didn't think the state pension was included in the total pay under section A1, so maybe that's my error?
 
The state pension is not on a P60.

The standard rate band is adjusted to take account of the state pension.

So someone with only a occupational pension has 32,800 at 20% 12,200 at 41%.

State pension plus occ pension 32,800 @ 20%, 24,200 @ 41%.
 
You can't omit tax credits - they are also reduced at 20% to cover the tax due on the state pension so if you assume tax credits of 2400 which is reduced to 0 to cover the state pension then both scenarios pay 14250 tax.
 
You must log in or register to reply here.
Back
Top