UKC

/ Student loans and pension income

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Thugitty Jugitty on 15 May 2018

Could someone who knows what they are talking about please help me understand under what circumstances student loan repayments would be taken from an occupational pension income?

For a Postgraduate loan, it is only income above £21k which will be 'taxed' at 6% for student loans, but normal occupational pensions (not paying class 1 NIC) are excluded. However, if you're subject to self assessment by HMRC when you're a pensioner, there's a vague paragraph which suggests otherwise. It's here: http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,6678571&_dad=portal&_schema=PORTAL

It says 'The only time an occupational pension could attract student loan amounts would be if you are required to complete an annual Self-Assessment (SA) Tax Return for HM Revenue & Customs and the total of all your unearned income exceeds £2,000.'

If you have a bit of 'unearned' income (whatever that means) on top of your pension, and have to complete self-assessment, your pension income above £21k then becomes liable to student loan repayments whereas everyone else pays nothing?

Post edited at 07:36
bedspring on 15 May 2018
In reply to Thugitty Jugitty:

I think the threshold is rising to 25K https://www.slc.co.uk/students-and-customers/loan-repayment/interest-rate-and-threshold-changes/threshold-changes.aspx so maybe you are worrying other nothing.

Do you think though that if you do have an income over the threshold at pensionable age, that you should not have to pay anything back, when young people in their first job and saving for a deposit do have to do. Do you feel their is some unfairness here?

2
Thugitty Jugitty on 15 May 2018
In reply to bedspring:

> Do you think though that if you do have an income over the threshold at pensionable age, that you should not have to pay anything back, when young people in their first job and saving for a deposit do have to do. Do you feel their is some unfairness here?

I agree with you that those people of pensionable age with an income over the threshold should pay something. That wasn't the point of my question. What seems unfair or unclear is that those people subject to self assessment when receiving a pension are apparently treated so differently, in terms of student loan repayments, to those people not on self assessment. 

bedspring on 15 May 2018
In reply to Thugitty Jugitty:

Ah. So people on corporate or public sector pensions over the threshold, (edit, who will have got their first degree for free or at much lower cost) will not pay. Wheras people, maybe self employed who have saved up and possibly bought a buy to let, due to low interest rates to give themselves an income, will pay.  That sounds unfair.

Post edited at 08:59
BnB - on 15 May 2018
In reply to Thugitty Jugitty:

No tax system is completely fair and they are all fiendishly complicated so I may not have this right. But my understanding is that anyone employed, self-employed or retired and in receipt of £2k in unearned income (interest on bank deposits or dividends from shares usually) is automatically required to enter a tax return as tax will be potentially due on that income. So in practice the rule applies to everyone not just you. And, as it takes £200k deposit or £50k in equities to make £2k of unearned income* it would appear to be a measure to prevent abuse of the loan system.

 

* Wild generalisation to illustrate the point. I know you can make £2k on bitcoin with a small stake (although that isn’t defined as income anyway)

Post edited at 09:17
Deadeye - on 15 May 2018
mik82 - on 15 May 2018
In reply to Thugitty Jugitty:

I take it from your initial post that you're on the "new" style student loan rather than the old one that is wiped at aged 65?

Thugitty Jugitty on 15 May 2018
In reply to mik82:

> I take it from your initial post that you're on the "new" style student loan rather than the old one that is wiped at aged 65?

Yes, I'm asking about the new style Postgraguate loan, which expires after 30 years I think.

Thugitty Jugitty on 15 May 2018
In reply to BnB:

Ah, that makes sense. Thanks.


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