Does anyone know why this is ?
I have searched on the internet but cannot find the reason.
It always strikes me as odd that the former UK colonies do not have this but RP does.
Thanks John
Does anyone know why this is ?
I have searched on the internet but cannot find the reason.
It always strikes me as odd that the former UK colonies do not have this but RP does.
Thanks John
... I've always understood most - if not all - Occupational Pensions in the UK were index-linked to the rate of inflation, John ... I know mine is ... or was until April this year, when former Local Government employees [like myself] had their annual 0.XXX (whatever it happened to be) increases frozen
due to the economic recession.
But it occurs to me ... you may, in fact, be referring to the British State Pension here!?
OAP UK, why index linked in RP ?
Yes it was the State retirement pension I was referring to.
I know for example that if one goes to Canada the pension stays at what it was at the time of emigration, thus some people who have been there many years are getting almost nothing. But as you will know in RP if there is an increase in UK a person living in RP will get it too.
Seems strange, right enoughOriginally Posted by johncar54
its own set of rules!
I am confused about Canada now as on the internet it shows it is not index linked, which I know was the case, but in a UK Gov list it shows Canada is.
But the point I was making why is RP include, not why Canada is not.
Its not a question of the country you living in but the UK Gov policy.
(Incidentally, if one lives in Spain, and I guess it must apply to many other countries too, the OPA is taxable in that country and NOT in UK. In Spain if one pays the tax in UK they are still liable to Spanish tax and could be fined and the unpaid tax, in the case of Spain, for the past 4 years, plus interest is claimable. This also applies to off-shore accounts, where there is a withholding tax. It is not an alternative, the tax in the country of residence (for Spain anyway) is still payable. I know a guy here in Spain who has been resident here for 20 years and did not know he was required to make his tax returns in Spain. He has always done in UK and (incredibly) thought he could choose where he pays.)
It is something to do with reciprocal arrangements about tax/benefits but on the face of things there doesn't seem to be any logic as to which countries UK state pensions get the increase and which ones don't.
Johncar54
The question you have asked may seem quite simple but in fact is extremly complicated.
Historically it goes back to the 1950's when the UK entered into reciprocal social security agreements with other countries.
Depending upon the agreements signed this allowed Social Security Benefits and Uprating Regulations to be applied to pensions both ways. Means that the UK government would agree to uplift pensions of UK citizens abroad if other countries also agreed to boost the pensions of their citizens living in the UK.
However since that time although the UK state pension is payable world-wide it is only uprated abroad where there is a legal requirement to do so.(ie signed and appropriate reciprocal social security agreement)
The issue is seen as a legal and financial one rather tham a moral one.
Current estimates are that it would cost approximately £4 billion to bring frozen rate pensions up to current levels and to pay all the arrears.
It would cost around £550 million if arrears were not paid and this would be an ongoing cost which would rise year on year.
Interestingly, reciprical agreements with the Philippines (as with many other countries)also include 'Double Taxation' agreements. This means that the pensioner can choose
which country to have pension payments taxed. The Philippines have a tax rate
of 0% on pensions. So any pensions paid to you in the Philippines would be tax free provided you have made the appropriate legal declarations to HMRC.
This does not apply to Govt state pension, however, since the level of state pension is below the personal allowance level, this also effectively becomes tax free.
All reciprical agreements are highly complex, and sadly to an extent rather political depending upon national relationships at the time they were introduced and signed.
It's my understanding
Thanks Terpe for the explanation.
Re the double taxation agreements 'choosing where one pays tax.'
Certainly the agreement which exists between Spain and UK does not allowing any choice about where one pays tax. If one is physically in Spain for 183 days per year, or has their main residential home or their centre of business activities in Spain then they must make a tax declaration on their worldwide assets in Spain.
In the agreement UK/Spanish (there are many variations with agreements with other countries) income from rental property in UK and Government employee pensions (Police, military etc) are taxed in UK. As too, in part, is the interest on bank/building Society accounts. If the bank will not pay interest gross, Nationwide for example is one which will not pay interest gross, then the bank stop 20%. If one is living in Spain they can recover 8% of that. The remaining 12% is retained by the UK taxman, but it can be used to off-set tax payable in Spain.
The UK/Spanish agreement has the effect that if one has a Government employee pension in UK, which is as I said, is taxed at source, it is ignored in Spain and thus one get full tax relief on all other income. This means that around the first 7,000 euros is tax free. If one lives in UK then the State Pension is added to ones other income, and although it is paid tax free, it is nevertheless taxed (if ones income exceeds the relief allowance) as it becomes part of ones gross income.
As I mentioned, the UK and Philippines has a “double taxation agreement”
This means that when you receive pension payments, those payments should only be taxed once if you’re living in a country with which Britain has a double taxation agreement.
If there is no double taxation agreement in effect between the two countries, you can expect to be taxed twice.
Normally, your pension will be taxed at source in the UK but, if you are resident abroad, and you let HMRC know that your pension will be taxed in your country of residence, the tax in the UK will not be applied.
Where that is the case, and you make a claim for relief, HMRC will authorise payment of your pension without deduction of tax.
When resident in Philippines you will need to obtain a TIN (Tax Identification Number) from Phils BIR and send this to HMRC with your claim for relief as evidence.
Currently income from pensions are taxed at 0% in Philippines.
DT15366 - DT: Philippines: double taxation agreement
Article 17: Pensions
Subject to the provisions of Article 18, pensions and other similar remuneration paid in consideration of past employment to a resident of a Contracting State shall be taxable only in that State.
http://www.hmrc.gov.uk/manuals/dtmanual/dt15366.htm
http://www.hmrc.gov.uk/manuals/dtmanual/DT1926.htm
Contact details for enquiries at HMRC:-
http://search2.hmrc.gov.uk/kbroker/h...tx1=&tx0=49672
Double taxation agreements.
I was referring to what appertains in the case of the Double taxation agreement between UK and Spain. It is the one which have almost intimate knowledge of as I live in Spain and almost all my income is derived from UK.
As I said, in the UK/Spanish agreement, there is no element of choice regarding where one pays tax under that agreement.
johncar54
Sorry John, I do not know the potential benefits of Double Taxation agreements between UK and Spain. (if any)
As with 'reciprocal social security agreements' it all depends on what exactly was agreed and signed.
Terpe, Thanks I mentioned the way it works between Spain and UK as I have knowledge of that and I suspect it may be useful to some of those reading this. I also thought it might spur those who do not knopw the position they are in, wherever they live, to seek advice.
I know someone who has lived here in Spain for 20 years and has always submitted his tax returns in an 'illegal' manner, mistakenly believing that ignorance will be his defence if he has any problems. I also aware of several others who also have their heads in the sand.
John, I agree. A very important issue.
Someone once said there are only two things you cannot escape in life 'death & taxes'
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