State pension and other pensions not connected with the armed forces
This section looks at tax issues associated with the state pension and other pensions you receive that are not from armed forces pension schemes.
When will I receive the state pension and how much will I get?
You become eligible to receive the state pension at state pension age. This age is gradually increasing over the next few years. You can check when you reach state pension age as well as how much you are likely to receive on GOV.UK.
If I die before state pension age does my spouse or civil partner get any of my state pension?
They will not get any of your basic state pension as such, but they may be able to use some of your National Insurance contribution record to increase any entitlement they have to a state pension. If your bereaved spouse or civil partner remarries or forms a civil partnership before they reach state pension age, their state pension will not be affected by any contributions made by you.
If you would have been entitled to additional state pension or a protected payment or you had deferred taking your state pension, then your bereaved spouse may inherit some rights.
You can read more about this on GOV.UK.
What if I defer receiving the state pension?
You can read more about this in our ‘Pensioners’ section, including how it may affect other state benefits.
How is tax collected on the state pension?
The state pension is paid by the Department for Work and Pensions (DWP) without any tax deduction, but the state pension is taxable. In order to collect the tax HMRC usually set part of your personal allowance against the state pension in your Notice of coding. This means that the source of income that the code is operated against is allocated less personal allowances and so more tax is collected from that other source of income.
For example, for 2017/18 the basic personal allowance is £11,500. The current rate of state pension is £122.30 per week or £6359.60 per year. (Note that if you are entitled to the new state pension, your pension income may differ from this). An individual receiving the state pension for a whole year would have a tax code of 5144L. This is calculated like this:
£11,500 less £6,359 = £5,141
That figure is divided by 10 to give the tax code of 514L.
In the year when you start receiving your state pension it is common for your tax code to be incorrect, resulting in you underpaying tax. You should therefore check your Notices of coding carefully.
When can I start receiving other pensions?
Normally you can start receiving other pensions at any time from age 55, although your pension scheme might use a higher age.
What options are available for taking money from those other pensions?
This depends on the type of pension scheme that it is. You can read more about this in our section on ’Pensioners and tax’.
What if I retire abroad?
Depending on the type of pension it is, it may or may not be liable to tax in the UK. You can read more about this in our section on ‘Pensioners and tax’. Remember you may also have tax obligations in the country where you are resident.
Where can I find more information?
Pension Wise can provide free impartial advice on defined contribution pension schemes.