Deferred State Pension

evergreen

I deferred my state pension for a couple of years (old style pension), and have been looking at my options recently. I've been told my pension will be increased by10.4% for each year I have deferred or alternatively I can have a lump sum of amount I haven't been paid including interest at bank rate plus 2%. My maths, which isn't as good as it used to be, tells me I have to live for about 9.5 years to break even. Is that correct? Would appreciate any advice.

luvchocolate

Yes thats correct, If you read the D.W.P sections on deferring it explains it all.
Its a great deal and unless you need the lump sum or your health is not good its a no brainer.

Linton

Your calculation is only correct if you assume zero inflation. According to my calculations if you assume 2% inflation (ignoring triple lock) the breakeven point reduces to about 8 years. This happens because the 10.4% extra is increased with inflation whereas the benefit from the lump sum isnt once it has been paid.

So as luvchocolate says going for the 10.4% extra pension is a no brainer unless you have a very low life expectancy or urgently need the cash.

badmemory

Definitely go with the increased pension. I took the increased pension several years ago & am still reaping the benefits. After 5 years I worked out that 50% of my lump sum would be gone by now & I would be worrying about my financial future.

kidmugsy

evergreen wrote: »

I deferred my state pension for a couple of years (old style pension), and have been looking at my options recently. I've been told my pension will be increased by10.4% for each year I have deferred or alternatively I can have a lump sum of amount I haven't been paid including interest at bank rate plus 2%. My maths, which isn't as good as it used to be, tells me I have to live for about 9.5 years to break even. Is that correct? Would appreciate any advice.

Yep, less than 10 years does the trick. Unless you are in lousy health, or old as Methuselah, or in an unusual position with tax or benefits, the extra pension is likely to be a bet on which you will win BIGLY.

Alter_ego

Agree with all the above.
I deferred in Oct 2014 after drawing pension for 7 yrs. Anybody know if I can get a pension forecast in these circumstances? I obviously know the rate I was drawing in 2014, but unsure how the base pension has risen since then.

Linton

Alter_ego wrote: »

Agree with all the above.
I deferred in Oct 2014 after drawing pension for 7 yrs. Anybody know if I can get a pension forecast in these circumstances? I obviously know the rate I was drawing in 2014, but unsure how the base pension has risen since then.

You need to telephone the agency that deals with pension payments. I dont remember exactly who they are but it may be the the numbers given here. I have found them extremely helpful - they will look at the key information and work out the answer whilst you wait, or at least give you sufficient information for you to work it out yourself. They can also send a letter confirming the numbers. Information on deferred pensions isnt available through the usual websites and help lines.

aphill24

badmemory wrote: »

Definitely go with the increased pension. I took the increased pension several years ago & am still reaping the benefits. After 5 years I worked out that 50% of my lump sum would be gone by now & I would be worrying about my financial future.

Hi Bad memory, as someone that knows nothing about deferred pensions can you explain in simple terms what you actually did as I'm sure I can learn something here. What is meant by taking the increased pension? and how would 50% of the lump sum be gone?
Thanks in advance

mark5

aphill24 wrote: »

Hi Bad memory, as someone that knows nothing about deferred pensions can you explain in simple terms what you actually did as I'm sure I can learn something here. What is meant by taking the increased pension? and how would 50% of the lump sum be gone?
Thanks in advance

Bad memory deferred taking state pension at state pension age, by doing this when they finally claimed state pension at a later age they had 2 options, either a lump sum to compensate for the missed pension payments or a higher weekly pension payment.

If bad memory had taken the lump sum then half of it would be gone by now covering living expenses that the extra weekly pension pays for instead.

aphill24

mark5 wrote: »

Bad memory deferred taking state pension at state pension age, by doing this when they finally claimed state pension at a later age they had 2 options, either a lump sum to compensate for the missed pension payments or a higher weekly pension payment.

If bad memory had taken the lump sum then half of it would be gone by now covering living expenses that the extra weekly pension pays for instead.

Thanks Mark5 that makes sense