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Pension lump sum advice

 
Popeyeukuk
(@popeyeukuk)
Active Member Registered
  1. I am due to retire from the police in the next 12 months. I understand that my monthly pension will contribute as earnings.  
    however can anyone advise if my commuted one off lump sum will be taken into account as earnings by CMS. Anyone have any experience of this ? Thank you for reading
Quote
Topic starter Posted : 06/12/2021 10:27 pm
edpacket
(@edpacket)
Trusted Member Registered

If you are referring to the 25% tax-free lump sum it won't. As it is not taxable, it doesn't appear on your p60 and it is not used to calculate your CMS.

 

 

ReplyQuote
Posted : 06/12/2021 11:00 pm
Bill337
(@bill337)
Famed Member

as far as I am aware, they only take into account taxable income. found this info from their leaflet:

Weekly amount – Flat rate

The paying parent pays the Flat rate of £7 a week for child
maintenance if:

• their gross weekly income is £100 or less
or
• they, or their partner who they live with, receive any of the following
income-related benefits:
– Income Support
– Income-based Jobseeker’s Allowance
– Income-related Employment and Support Allowance
– Pension Credit

or
• they receive one of the following benefits:
– Contribution-based Jobseeker’s Allowance
– Contribution-based Employment and Support Allowance
– Category A, B, C or D Retirement Pension
– State Pension
– Incapacity Benefit
– Training allowance (other than work-based training for young
people or, in Scotland, Skillseekers training)
– Armed Forces Compensation Scheme payments
– War Disablement Pension
– War Widow’s Pension, War Widower’s Pension, or Surviving Civil
Partner Pension
– Bereavement Allowance
– Maternity Allowance
– Carer’s Allowance
– Severe Disablement Allowance
– Industrial Injuries Benefit
– Widowed Mother’s Allowance
– Widowed Parent’s Allowance
– Widow’s Pension
– A social security benefit paid by a country other than the
United Kingdom.

If the paying parent or their partner are getting any of these benefits,
we normally take the child maintenance direct from the benefit or
Pension Credit.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/672432/how-we-work-out-child-maintenance.pdf

ReplyQuote
Posted : 06/12/2021 11:15 pm
Popeyeukuk
(@popeyeukuk)
Active Member Registered

@edpacket 

yes the tax free lump

Thank you for the reply ed. it’s what I thought but wasn’t 100% sure 

ReplyQuote
Topic starter Posted : 06/12/2021 11:16 pm
Popeyeukuk
(@popeyeukuk)
Active Member Registered

@bill337 thank you for the info

i would earn around £19000 pension per annum after the tax free  lump sum. I assumed that this amount would be my declarable taxed earnings which I suppose is a fair amount 

ReplyQuote
Topic starter Posted : 06/12/2021 11:29 pm
Will99
(@Will99)
Estimable Member Registered

Just a word of caution -

If your ex- applies for a notional income variation, then this will look at your asset values, including cash and shares etc. Anything above £32,500 can be included in the notional income variation - the income is calculated to be 8% of the asset value, and that sum is included as 'additional income' in the CM assessment. I assume if your lump sum is put in a bank account or investment, and that balance or asset value is then above £32,500, then 8% of the total can be assessed.

ReplyQuote
Posted : 07/12/2021 4:08 pm
Popeyeukuk
(@popeyeukuk)
Active Member Registered

@Will99 


thank you but I thought  variations are used on unearned incomes and diversion tactics 

ReplyQuote
Topic starter Posted : 07/12/2021 4:41 pm
Popeyeukuk
(@popeyeukuk)
Active Member Registered

Below Source citizens advice. I can’t see mention of pension lump sum. I understand I will be paying though on my taxed monthly pension which seems fair.

Check when you can get a variation

If the CMS agrees to a variation, they can add any extra income to the paying parent’s income and make a new calculation.

This type of variation is called an ‘additional income variation’ and covers:

  • unearned income - like income from rent

  • earned income - like pay from a second job

  • income which has been moved to reduce how much the paying parent has - this is called ‘diverted income’

  • income from assets worth over £31,250, for example a second home or shares - this is called ‘notional income’

Unearned income

You can apply for a variation if the parent paying maintenance has taxable income of more than £2,500 a year from any of the following sources:

  • property - like rental income

  • savings, investments and interest on bank accounts

  • other income - like casual earnings from one-off jobs

ReplyQuote
Topic starter Posted : 07/12/2021 5:05 pm
Will99
(@Will99)
Estimable Member Registered

@popeyeukuk 

that fourth bullet - income from assets over £31,250 - includes cash assets, investments, property (unless it is your primary residence or you rent it out and get assessed on the rental profit instead), foreign assets, and some less obvious ones like gold bullion etc.

Others may be able to correct me, but if you took your lump sum and put it in the bank, or invested it, and the total value of that asset then exceeded £31,250, then it could be in scope of the notional income calculation, should your ex- apply for a variation on those grounds. I’ve been hit with this recently with ISA funds that are intended as a repayment vehicle for the mortgage on the property that I let out (and I am also assessed on the rental profit from the same property).

Best bet is to ensure that no single asset exceeds £31,250, so if you have say £50k lump sum don’t put it all in the same place (if your ex- is clued up enough to apply for the variation).

This post was modified 2 months ago by Will99
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Posted : 07/12/2021 5:42 pm
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