His Majesty’s Treasury has delivered a crucial update following a campaign demanding the scrapping of pension tax for elderly armed forces personnel. The petition, which has now gathered more than 27,000 signatures, branded this tax a complete ‘injustice’ and argued that its abolition at age 60 would create greater ‘balance’.
As a standard rule, funds withdrawn from pension savings face taxation similar to employment income or other earnings. This means you typically won’t face any tax if your total yearly income falls below your Personal Allowance, which is usually £12,570. Unlike numerous other pensioners, those within the Armed Forces Pension Scheme receive multiple advantages, including Early Departure Payments, tax-free lump sums, inflation-linked pension rises, and no monthly salary deductions.
Nevertheless, whilst the Government enormously values their service, it has no intention to fully abolish their pension tax currently. In an update issued on September 15, the Treasury said: “The Government hugely values the service of our armed forces but currently has no plans to make Armed Forces pensions tax free at age 60.
“We are profoundly grateful for the service of members of our armed forces, and therefore it is only right that they are entitled to a pension that ensures dignity in retirement. Members of the Armed Forces Pension Schemes do not have to pay contributions to their pension schemes.
“These are the only public service pension schemes that are non-contributory. The Government currently has no plans to make Armed Forces pensions tax free at age 60.
“The Armed Forces Pension Scheme provides tax-free lump sums to members on retirement. Other pension payments from the Armed Forces Pension Scheme are treated as taxable income under UK tax law.
The response continued: “This tax treatment reflects the fact that pensions are forms of deferred income and, as such, are taxable. This same tax treatment applies to payments from all occupational pension schemes.”
Right now, the petition entitled ‘Make the Armed Forces pension tax-free’ has amassed more than 27,000 signatures. Should it reach more than 100,000, it will be considered for a debate in Parliament.
The full petition reads: “Make the Armed Forces pension at age 60 tax-free. We think this would balance out what we see as an injustice.”
For additional information, head to the UK Government and Parliament website here.