We are aware that there may be tax implications for members of the police pension scheme who retire and return to work for the same employer before age 55. Our understanding of the current position relating to reemployment after retirement is given below and can also be found in table form here.
If you have completed 30 years pensionable service before your 50th birthday:
Your benefits would become subject to additional tax charges if:
"Connected" has a specific meaning for tax purposes and for tax purposes a police officer is not and cannot be "connected" to any sponsoring employer in the Police Pension Scheme.
As the above would not apply, there is no need for the break of 1 month.
If you're between age 50 and age 55 and did not complete 30 years pensionable service before age 50
Your pension benefits will become subject to additional tax charges unless the following conditions are met:
If you return as a police officer
You have a break of at least 1 month before reemployment. If a break is taken, your pension benefits would be subject to abatement under the pension scheme regulations but you would not become liable to any additional tax charges.
If you return as a civilian
If you are employed by the same police force, you have a break of at least 1 month. We believe that you would only need a break of 1 month because, as civilian staff, you would no longer have the power of arrest and no longer carry weapons / equipment therefore you will be employed in a materially different role. If you return to work for another police force or a different employer, you would not require the break.
If your protected pension age is lost, all pension payments made up to age 55 become unauthorised payments (even if you leave your employment). Your pension will be taxed at a rate of between 40% and 55%. If you have not received your lump sum before your reemployment begins, this would also incur a tax charge.
Although XPS provide a full pension administration service we are not qualified or registered to give tax advice. This is our interpretation of the position only and does not represent an authoritative statement of law.