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HMRC internal manual

PAYE Manual

PAYE operation: pensioners: pension paid by employer to retired employee

A non RTI employer who begins to pay a pension to a retired employee is required to tell HMRC the following, within 14 days of an employee’s retirement

  • The employee’s name and NINO
  • The date of retirement
  • The cumulative earnings at the date of retirement or pay in `this employment’ if different
  • The total tax in ‘this employment’ to date of retirement
  • The amount of weekly or monthly pension payable

This information should be submitted on form P46(Pen). This form replaces form P160, which was used until 5 April 2009. The employer must also provide a copy of the form or informal notice to the employee. Form P45 is not appropriate in this situation and you should encourage the employer to follow the advice given in the ‘Employer Further Guide to PAYE and NICs’ (CWG2).

RTI employers who begin to pay a pension to a retired employee on the same payroll do not submit a P46(Pen). They are also not required to submit leaving information, as they will continue to pay the individual. Notification of the new pension will be submitted via the employer’s FPS, on which the Occupational Pension indicator will be set.

RTI employers must also use a different Works number or ‘Payroll ID’ for the retired employee’s pension payments and will indicate on the FPS that the Payroll ID has changed.

All employers who begin to pay a pension to a retired employee are also required to operate the existing code on a Week 1 / Month 1 basis until HMRC issue a revised tax code notification.