Lord Laird – 2014 Parliamentary Question to the HM Treasury

The below Parliamentary question was asked by Lord Laird on 2014-06-04.

To ask Her Majesty’s Government whether lump sum retiring allowances in public sector pension schemes and the equivalent in private pension schemes including annuity payments and pension commencement lump sums are taxable; if so, whether they are taxed in the same way; and what are their proposals for taxing lump sum payments under the new pension arrangements announced in the Queen’s Speech.

Lord Deighton

At retirement individuals have the option of taking up to 25 per cent of their pension fund as a tax free pension commencement lump sum.

Individuals at retirement can also take their pension pot as a lump sum:

· If their total pension pots under all the schemes they belong to are worth £30,000 or less

· Under certain circumstances, one of their pension pots is worth £10,000 or less

25 percent would be tax free with the rest being taxed at the individual’s marginal rate.

These rules apply to all registered pension schemes and therefore apply to both defined benefit and defined contribution pensions and to both private and public sector schemes.