The elderly
The sections below contain tax saving advice for the elderly.
Overseas pensions
Some pensions paid from overseas governments are assessed in the UK after deducting a 10% relief. To qualify the pension must be paid by or through an agent, officer or public department of the overseas government. If you complete a tax return you should claim the 10% deduction in box 11.13 of the main tax return form SA100.
State pension
The state retirement pension is paid without the deduction of any tax. If you complete a tax return you must include it on your tax return as it is still taxable.
Employee pensions
An exemption applies to some UK pensions awarded to former employees for injury at work or a work related illness. If this pension is more than you would have got if you had retired at the same time on ordinary ill-health grounds, the extra pension does not need to be included in boxes 11.10 to 11.12 on the self assessment tax return.
Buying an annuity
If you have paid into a pension scheme you may not have to buy your annuity from your pension provider. By law personal and stakeholder pensions must give you an open market option.
Annuity income
The full amount of a pension paid from a pension scheme is taxable. An annuity, however, bought with your own money (known as a purchased life annuity) has a capital element which is tax-free.
The purchased life annuity can be bought with the tax-free lump sum from a personal pension scheme.
When you retire
About four months before you are due to retire, you should receive a form from the DSS. You can use this form to advise them when you want to receive your state pension and how you want it paid. You should also inform your tax office when you are due to receive the pension so they can make any necessary adjustment to your tax code.
Married couples allowance
Married couples aged between 65-74 are entitled to an allowance of £6,285, and those aged over 75 are entitled to £6,365 for 2007/2008, where either spouse was born before 5 April 1935. You can also transfer any unused allowance to your spouse.
Government allowances
The winter fuel payment is currently £200. Since November 2000 pensioners aged over 75 can claim a free TV license.
National insurance
Once you've reached retirement age (65 for men, 60 for women) you do not pay national insurance contributions.
If you are self-employed you do not pay NIC after the 5 April following your 60/65th birthday.
Investments
If you are 65 or over you will not receive the full higher age allowances if your taxable income is above the income limit (£20,900 for 2007/2008). Choosing investments wisely, transferring income producing assets to your spouse, and giving to charity are just a few ways of ensuring you receive the full allowances you are entitled too.
This page was last reviewed on 03 April 2006. The information may not reflect changes in legislation made after this date.
This is only a guide to your tax position and should not be relied on in place of professional accounting or tax advice. Any calculated figures are illustrative and are based on the data you provided.
