NED News Adviceline: Summer 2016

July 1st, 2016 by North East Derbyshire CAB

I’m 55 and looking into my plans for retirement. I want to cash-in part of my defined contribution pension pot worth £60,000 but I’m confused about tax. How much can I take out of my pension pot tax-free and how much tax will I pay on the rest?

Pensions are taxable income, however special rules mean you can usually take up to 25% of your pension pot tax-free.

You can take your 25% tax-free lump sum out of your pension in one go. For your pension pot of £60,000, if you take a 25% tax-free lump sum you’ll get £15,000 tax-free. For the other £45,000, you’ll need to buy an annuity or drawdown product, which is subject to tax.

If you don’t want to take your 25% tax-free lump sum in one go, another option is to take multiple cash lump sums (UFPLS), rather than buying an annuity or a drawdown product. If you do this, you will get 25% tax-free of each lump sum. For example, if you were to take £1,000 per month out of your pension, £250 would be tax-free. The remaining £750 is taxable.

How much tax you pay on the rest of your pension will depend on how much you “earn” in any one tax year. This includes your state pension and some earnings from investments, such as property or savings. If your total income is less than your personal allowance of £11,000, you won’t pay any tax. If it is above £11,000 you’ll be taxed at 20, 40 or 45% as usual.

To find out more about your pension options, visit www.pensionwise.gov.uk

“My father recently had a stroke and I have cut down my working hours to care for him. He receives sick pay, but we are struggling financially. Is there any help available for us?”

Financial support is available for people when they become ill, as well as for their carers. What is available will depend on your circumstances.

Your father may be eligible for Personal Independence Payments (PIP) to help with his daily living and mobility costs. His eligibility will be assessed on how his condition affects him, and what support he needs.

To apply for PIP, your father can call the Department for Work and Pensions (DWP) and then complete the form he is sent. He can request a form by post, but it is usually better to start the claim over the phone, as PIP payments are backdated from the day you made your claim.

 

There may also be help available for you as his carer. Carer’s Allowance is a financial assistance for people who have less time to work because they are caring for someone. If you earn £110 a week or less from your job after tax, and care for your father for 35 hours a week, you may be eligible.

You can make an application on the gov.uk website. To claim Carer’s Allowance, your father needs to be in receipt of the component of PIP which covers living costs (as opposed to mobility costs).

If you need help or information on applying for any of these benefits, contact your local Citizens Advice or go online at www.citizensadvice.org.uk.

I’m a self-employed woman and I’m thinking about starting a family. Am I able to take paid maternity leave?

Maternity entitlements are different for self-employed women but financial support is still available.

Self-employed women who have a baby may be entitled to a total of 39 weeks Maternity Allowance. The maximum weekly rate you can receive is £139.58 but it does depend what your individual circumstances are

In order to get the full amount you need to have worked (either employed or self-employed) for at least 26 out of the 66 weeks prior to your baby’s arrival. You should also have paid National Insurance contributions for at least 13 of those weeks and are required to have earned an average of £30 per week over 13 of the 66 weeks.

However, if you don’t meet all of these criteria it’s possible that you’ll still be able to receive some support.

You can put in a claim once your pregnancy reaches 26 weeks by filling in a MA1 claim form online or popping it in the post. The earliest you can receive the first payment is 11 weeks before your baby is due, or you can elect to start it as late as the day after the birth.

Employees often have ‘keeping in touch’ days and the same stands for self-employed workers. You can work for up to 10 days whilst receiving Maternity Allowance, but go over this threshold and you risk losing your allowance altogether.

If your household income isn’t enough to cover your costs you might also be entitled to further financial aid such as the Sure Start Maternity Grant or income-related social security benefits.


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You can also access advice from a number of places around North East Derbyshire and Bolsover