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Top Policewoman Retires Aged 50 Just Months After Being Promoted - Giving Her An Extra £450K In Pension Payments

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http://www.dailymail.co.uk/news/article-2665810/Top-policewoman-retires-aged-50-just-months-promoted-giving-extra-450k-pension-payments.html

One of Britain's most senior policewomen has retired at 50, just months after a lucrative promotion that may have added an extra £450,000 to her pension pot.

Sharon Rowe used to earn about £100,000-a-year as an Assistant Chief Constable with West Midlands Police - but was chosen over three colleagues for the £140,000 Deputy Chief Constable role in November last year.

Police have the right to retire after 30 years service, so just seven months after her promotion Ms Rowe left her job on Sunday aged 50.

Today it was revealed her last promotion could have boosted her future pension payouts by an astonishing £456,773 by the time she reaches the age of 82.

That includes a potential tax-free lump sum bonus of £83,493 because police pensions are based on an officer's final year salary.

The revelations have caused a stir within West Midlands Police - which has seen pay freezes and job reductions as it faces cuts of almost £150million.

Nice work if you can get it. Are the Wails figure accurate is this how the police pension works?

I know that councils tend to get promotions to people nearing retirement so they can get a nice little pension boost.

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Nice work if you can get it. Are the Wails figure accurate is this how the police pension works?

As the increase in pension pot value is more than £50k,the excess will be treated as income for tax purposes.

This means a tax bill from HMRC for £400k of non PAYE income.

If she stayed on for 3 years or more, she could spread the uplift over 3 income years, paying tax only on £100k in each year.

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It's just wrong though isn't it? Retire at 50 on a £450k pension. It is so wrong.

The pension isn't £450k a year - it's £81k a year.

However, last year, this woman's pension was about £66k a year. Then after a promotion, under the final salary rules of the pension scheme, it went up to £80k.

There is no doubt that that is an incredibly generous pension.

However, the sting in the tail is the 6 figure tax bill that will accompany that pension. Actuarial rules for the "imputed pension pot" of a final salary pension, calculates the imputed pot value at 18x the annual pension - but this is for retiring at 65. For someone retiring at 50, it's closer to 30x the annual pension payment. So, the uplift in the value of the "pot" is about 30 x £15k = £450k.

Because that £450k exceeds the £40k limit on pension contributions, it counts as taxable income - so £410k it will be taxed at 45%.

I just hope that her accountant has warned her that HMRC will be sending her a bill for £185k at the end of the tax year.

One of the quirks of final salary pensions, and the new pension tax rules is that under certain circumstances, your tax liability for the year can exceed your gross salary. This appears to be one such example.

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The pension isn't £450k a year - it's £81k a year.

However, last year, this woman's pension was about £66k a year. Then after a promotion, under the final salary rules of the pension scheme, it went up to £80k.

There is no doubt that that is an incredibly generous pension.

However, the sting in the tail is the 6 figure tax bill that will accompany that pension. Actuarial rules for the "imputed pension pot" of a final salary pension, calculates the imputed pot value at 18x the annual pension - but this is for retiring at 65. For someone retiring at 50, it's closer to 30x the annual pension payment. So, the uplift in the value of the "pot" is about 30 x £15k = £450k.

Because that £450k exceeds the £40k limit on pension contributions, it counts as taxable income - so £410k it will be taxed at 45%.

I just hope that her accountant has warned her that HMRC will be sending her a bill for £185k at the end of the tax year.

One of the quirks of final salary pensions, and the new pension tax rules is that under certain circumstances, your tax liability for the year can exceed your gross salary. This appears to be one such example.

If available unused annual allowance from the previous 3 years could be used to reduce this bill

http://www.hmrc.gov.uk/pensionschemes/calc-aa.htm#4

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Getting promoted a year or two before you retire is pretty common practise in the police.

Police officers are incredibly defensive over their pensions - many of them planning to use their lump sums to pay off their mortgages. Pensions are the number one topic of conversation for most police officers.

In my experience when I worked in the police in a civillian capacity, they tend to get very excited when you point out how generous their pensions are, oft pointing out their 11% employee contributions in retort. They get very excited indeed when you point out that the taxpayer contribution can be as high as 80% and oft point out that I have work to do and that I'm only a f***ing skivillian in any case.

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