Tax

The Plan provides tax benefits for you while you are building up your pension - all your contributions receive tax relief at the highest rate you pay, returns on investments (i.e. investment income) are not subject to tax and, when you retire, you may take a tax-free cash lump sum within certain limits. However, when you start receiving your pension, it is subject to income tax in the same way as your pay.

Indeed, your tax situation may become a bit more complicated if you have different types of income from a variety of sources - savings, sale of property, various pension schemes, insurance policies that have matured or unit trusts, and so on. As always, whether and how much you pay in income tax will depend on the level of your income and other personal circumstances.

You will be taxed under an emergency code until the Pensions Service Centre is notified of your tax code. This may take up to three months. As soon as you retire, or whenever your sources of income change, you should let your tax office (see below) know. As long as your tax office knows your date of birth, they will be able to issue a form which you can then complete stating your sources of earnings. They will normally do this as you approach State Pension Age, but it is your responsibility to keep HM Revenue & Customs informed of your income.

The tax you pay depends on your taxable income in the tax year and includes:

  • Your state retirement (old age) pension
  • Private pensions and AVCs
  • Gross interest from a bank or building society.
  • Dividends from shares and UK authorised unit trusts
  • Any earnings from a job or business
  • Income from property.

This is not an exhaustive list and you can check the HMRC website for a complete and up-to-date picture. If you want more information about tax allowances and rates, you can get current details and further useful information by visiting the pensioner section of the HMRC website.

Tax office details

The tax office for Royal Mail Pension Plan payments has recently been changed from Wrexham to Liverpool.  Details of the current tax office are as follows:

HM Revenue & Customs
PO Box 1970
LIVERPOOL
L75 1WX

Telephone: 0845 300 0627

When contacting HMRC you should quote your National Insurance number and Plan reference number 914/2.