My husband retired early. Should he sign on or wait for his pension to mature?

Published by Patrick Connolly on 14 December 2018.
Last updated on 14 December 2018

Q

My husband recently gave up his teaching career after 30 years. We are not claiming any money from Teachers’ Pensions yet as my husband is only 55 years old.  We took out a policy/pension 20 odd years ago and decided that he could give up teaching without having another job to go to by taking a tax-free lump sum from the separate pension, which we did in December 2017.

  My husband hasn’t worked since then and we are living off the lump sum for the moment. As he isn’t working, he isn’t paying tax or national insurance or drawing a pension. Is this OK or is there something he should be doing? He is looking at jobs but is being very selective and looking for something he feels he will enjoy.

I have told him to take out another £11,850 from the pot in March 2018 as this amount will be tax-free because it will be at the end if the 2018/19 tax year. Should he be ‘signing on’ for NI purposes or do we just carry on and wait until he is 59 years of age and his teacher’s pension will be mature?

  He gave up teaching as he was suffering with stress and we were worried about his health.

From:
SF/Birchington-on-Sea

A

What your husband has done is absolutely fine. If his health is particularly bad, he may be entitled to state benefits or even to access his Teachers’ Pensions scheme early without penalty through ill-health retirement.

As he is living off the tax-free sum from the other pension, there is no tax to pay. However, as he is no longer paying national insurance, he won’t be building up further credits for the state pension. He should request a state pension statement from Gov.uk/check-state-pension or by calling the Future Pension Centre on 0800 731 0175. This will tell him how much he might receive, when he should get it and if there is any way that he can increase it.

The Future Pension Centre will tell him how much he might receive

Going forward, he can make ‘taxable’ withdrawals from his other pension and as long his total income doesn’t exceed the personal income tax allowance, which is currently £11,850 for the 2018-19 tax year, then he will have no tax to pay.

He should be aware that if he takes additional money from his other pension, he will be deemed to have flexibly accessed it, so this could limit the amount of pension contributions he could make in the future if he started working again.

If he doesn’t use his full personal allowance, he should be able to transfer up to £1,190 of this allowance to you if you are a basic-rate taxpayer, under the marriage allowance. This could reduce your tax bill by up to £238 in the current tax year.

If he does start drawing more money from the other pension, or from other sources, he may need to complete an annual self-assessment tax return. He should contact HMRC to confirm.

This article was written in response to a reader’s question. If you have a financial or work/career question that has left you scratching your head ask our panel of experts who will aim to shine some light on the matter.

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