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  • FIRST POST
    • Deb1112
    • By Deb1112 8th Oct 16, 11:25 AM
    • 6Posts
    • 4Thanks
    Deb1112
    Late claim for pension
    • #1
    • 8th Oct 16, 11:25 AM
    Late claim for pension 8th Oct 16 at 11:25 AM
    Hello, I need advice asap to help an old gentlemen.

    He was born in 1941 and has never claimed his pension. Before claiming I would like to confirm or otherwise regarding the pension he is owed since 2006 :
    • Is he entitled to the full ten years back payment in a lump sum?
    • If so, I believe he has not paid every NI contribution required. Should I try to help him do this by paying the missing contributions BEFORE making his pension claim? I would assume it would be worthwhile to try???
    • fyi to my knowledge he did not officially defer his pension
    Any helpful information would be most gratefully received as he has few funds and needs to apply for his pension urgently.


    Many thanks to MSE and you all for being here!

    I always come here before doing anything financial.

    Best Regards
    Debbie
Page 1
    • LXdaddy
    • By LXdaddy 8th Oct 16, 11:35 AM
    • 644 Posts
    • 395 Thanks
    LXdaddy
    • #2
    • 8th Oct 16, 11:35 AM
    • #2
    • 8th Oct 16, 11:35 AM
    Firstly, you don't have to do anything to "officially" defer your pension. If you don't ask for it to be paid it is automatically deferred.

    With a birth year of 1941 his SPA would have been in 2006. I think that any missing NI year would be too long ago for him to pay them.

    Assuming he does have an entitlement to a state pension then it is deferred under the pre-2015 rules so is increasing by 10.4% per year (0.2% per week). And he will have the choice of a lump sum or an increased pension.
    • xylophone
    • By xylophone 8th Oct 16, 11:55 AM
    • 20,104 Posts
    • 11,511 Thanks
    xylophone
    • #3
    • 8th Oct 16, 11:55 AM
    • #3
    • 8th Oct 16, 11:55 AM
    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/527015/state-pension-deferral-if-you-reached-state-pension-age-before-6-april-2016-extra_information.pdf

    https://www.gov.uk/voluntary-national-insurance-contributions/top-up-your-state-pension

    https://www.gov.uk/government/publications/the-basic-state-pension
    • Dazed and confused
    • By Dazed and confused 8th Oct 16, 12:29 PM
    • 782 Posts
    • 299 Thanks
    Dazed and confused
    • #4
    • 8th Oct 16, 12:29 PM
    • #4
    • 8th Oct 16, 12:29 PM
    Don't know much about deferring pension but it seems there could now be a very significant lump sum due.

    If your old gentleman is going to choose the lump sum over the increase in regular pension payments then you need to think about the tax side of things before doing anything official with DWP.

    Looking at some very basic examples on NI direct website the lump sum could be 50000 and the tax due on this would range from 0 to 22,500.

    Even claiming pension now and having lump sum in the next tax year may make a big difference (could be better or worse depending on other income, pensions etcetc)
    • atush
    • By atush 8th Oct 16, 12:49 PM
    • 15,582 Posts
    • 9,412 Thanks
    atush
    • #5
    • 8th Oct 16, 12:49 PM
    • #5
    • 8th Oct 16, 12:49 PM
    Yes, you really need to look hard at this before having him claim.

    Is he of good health? I assume he doesnt need a large sum or huge income either- as he has be living w/o his pension these last 10 years? Does he have a spouse? Any dependents to leave money to (if he took the lump sum).

    at 10.4% compounded, it seems to me he has more than doubled the SP he was entitled to? Does he have any need of a lump sum? Or would a big bump up in income be preferable?

    If he is of good health, the large bump in income could be preferable (to losing loads of the LS to tax). If he is frail, and has a spouse/children to leave money to, taking the lump sum and getting his normal SP is probably a good idea.
    • Dazed and confused
    • By Dazed and confused 8th Oct 16, 12:57 PM
    • 782 Posts
    • 299 Thanks
    Dazed and confused
    • #6
    • 8th Oct 16, 12:57 PM
    • #6
    • 8th Oct 16, 12:57 PM
    atush
    Can you do a mix and take smaller lump sum and bigger (than basic) pension?
    • xylophone
    • By xylophone 8th Oct 16, 2:14 PM
    • 20,104 Posts
    • 11,511 Thanks
    xylophone
    • #7
    • 8th Oct 16, 2:14 PM
    • #7
    • 8th Oct 16, 2:14 PM
    re tax

    http://www.litrg.org.uk/tax-guides/pensioners-and-tax/what-tax-do-i-pay-my-state-pension-lump-sum
    • Deb1112
    • By Deb1112 9th Oct 16, 8:09 AM
    • 6 Posts
    • 4 Thanks
    Deb1112
    • #8
    • 9th Oct 16, 8:09 AM
    • #8
    • 9th Oct 16, 8:09 AM
    Hi everyone
    Thank you all sooo much for your feedback.
    To clarify further, the gentlemen :
    • Has been working self-employed privately up until the past few months, only stopping due to ill health
    • Is single but does have adult dependents in regard to any estate
    • Has little to his name except debts, living day to day
    • Is frail now - pending heart operation in approximately one week!
    • has no other pension or income or savings
    • has no property or assets
    I believe the lump sum would be preferable for him as his time on the planet is likely to be highly reduced.

    Regarding the tax years, he would be in the lowest tax bracket as he has no other income.
    How would he split over tax years? Would this mean claiming half now and the rest after 5th April 2017?
    Will this lump sum impact his pension claim?
    Presumably he could claim pension credit to bring his income to the standard pension rate?

    Sorry for all of the questions but for sure he will ask me and I need to speak with the confidence you are providing me with :-)
    Thank you again!!!!
    Best Regards
    Debbie
    • xylophone
    • By xylophone 9th Oct 16, 10:09 AM
    • 20,104 Posts
    • 11,511 Thanks
    xylophone
    • #9
    • 9th Oct 16, 10:09 AM
    • #9
    • 9th Oct 16, 10:09 AM
    Re tax, see link above.

    With the gentleman's permission, you should be able to speak to DWP on his behalf - this should help clarify his position.

    Below leaflet for NI but should assist.

    https://www.communities-ni.gov.uk/sites/default/files/publications/dsd/your-guide-to-state-pension-deferral.pdf
    • atush
    • By atush 9th Oct 16, 1:40 PM
    • 15,582 Posts
    • 9,412 Thanks
    atush
    With the additional info, then yes he should go for the lump sum. No you cant split it.
    • Dazed and confused
    • By Dazed and confused 9th Oct 16, 2:22 PM
    • 782 Posts
    • 299 Thanks
    Dazed and confused
    It sounds like he is going to have to pay either no tax or 20% tax so you could be talking 10,000 difference here.

    As a starter you could estimate his income this tax year and next year. You have to look at the whole year so don't forget his business profits taxable in this year and his expected pension income. If his business has now ended it might only be pension income next tax year but you should factor in any savings interest he will presumably get once the lump sum comes through.

    It could be he's a basic rate payer this year thus, say, 10000 tax due on the lump sum but next year he might not be due to pay tax so no tax would be due on the lump sum.

    Getting the timing if this right can make a big difference to the funds he will end up with

    Not so sure about this but he might be able to take the pension now and get the lump sum after April next year
    • Deb1112
    • By Deb1112 9th Oct 16, 5:30 PM
    • 6 Posts
    • 4 Thanks
    Deb1112
    Thank you all so very much!
    You have made things a whole lot clearer for me and I will do my best to ensure that the outcome is the most profitable for him. I like to be sure before heading to Government departments as unfortunately, as with many businesses, not all information is known or perhaps given at the best time.

    Best wishes to you all and please keep up the good work!
    Many of us out here desperately need your insight and knowledge :-)

    Debbie
    • LHW99
    • By LHW99 9th Oct 16, 9:36 PM
    • 598 Posts
    • 428 Thanks
    LHW99
    Hope things go well for your friend.
    If you have time to update us on how things turn out I am sure I won't be the only one interested to know.
    • Deb1112
    • By Deb1112 9th Nov 16, 6:36 AM
    • 6 Posts
    • 4 Thanks
    Deb1112
    Hello again everyone
    I haven't forgotten to inform you after your much appreciated guidance.
    Pension claim submitted approximately four weeks ago and no sign of payment yet.
    Original certificates and copy of passport sent and returned by the service, only to be followed nearly three weeks later by a letter requesting:
    Date of Marriage
    Date of Divorce
    Name of wife

    AND the claimant suddenly had a middle name he never had at birth! OMG !!!
    I will keep you posted.
    Deb
    • Deb1112
    • By Deb1112 28th Jan 17, 1:45 PM
    • 6 Posts
    • 4 Thanks
    Deb1112
    Hi All
    I had not forgotten to respond. The process has taken 'forever due to various searches and previous marriage etc.

    Outcome: 68484.12 which is an absolutely fantastic figure!!

    So once again I would be grateful for your highly valued advice if you could spare the time.

    He must make a decision regarding the rate of tax rate to pay and which year to receive the lump sum 16/17 or 17/18. Also, if deferred to 17/18, what would happen if he died before the 5th of April 2017.

    He has not earned a great amount in 2016/17 doing odd jobs here and there.
    I would assume this would have been far less than 10k. He has paid no tax.
    His pension began in early October due to his heart operation:

    State Pension: 124.94
    Pension Credit: 30.66

    I am unsure what he needs to take into account for tax purposes i.e. is his state pension included?
    He has to make the choice of paying 0%, 20%, 40%, 45% tax on the lump sum.
    He is applying for housing benefit.
    Note: A majority of the lump sum will repay various people. I am unsure of the residual figure at this time. Will this payment affect other aspects of his benefits?

    Many thanks in advance if you could spare some time.
    We definitely need your much appreciated guidance.

    Best Wishes to you all
    Debbie
    • xylophone
    • By xylophone 28th Jan 17, 3:51 PM
    • 20,104 Posts
    • 11,511 Thanks
    xylophone
    http://www.litrg.org.uk/tax-guides/pensioners-and-tax/what-tax-do-i-pay-my-state-pension-lump-sum

    See above.
    • kidmugsy
    • By kidmugsy 28th Jan 17, 3:53 PM
    • 8,719 Posts
    • 5,654 Thanks
    kidmugsy
    The deal is that he pays tax on the lump sum at the same rate as he owes tax on his income. So if his earnings in 16/17 plus his weekly pension in 16/17 add up to more than the personal allowance for income tax (11,000), he'll need to pay 20% on his lump sum. In that case it may be better to ask for the lump sum in 17/18 because by then his earnings will have dropped out of the picture and he'd be looking at 0% income tax on the lump sum.
    Last edited by kidmugsy; 28-01-2017 at 3:55 PM.
    • xylophone
    • By xylophone 28th Jan 17, 3:53 PM
    • 20,104 Posts
    • 11,511 Thanks
    xylophone
    Re effect of the lump sum on pension credit - below may help but he should check his particular situation with DWP.

    http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS48_Pension_Credit_fcs.pdf?dtrk=true
  • jamesd
    It's worth considering that if he didn't take it as a lump sum his state pension would increase by about 104% using ten years of deferral. So about 255 a week or 13,000 a year. We don't know enough to say whether that might be better but Citizen's Advice has a benefits check service that he could use to work out which is best. His health would also be a major factor.

    You can ignore AnotherJoe's tax comment. It's probably because he didn't know that the lump sum is taxed the highest tax rate paid based on existing income. Most taxable pension lump sums are added to income but this is an exception. So if his highest rate this year is 0% the lump sum would be tax free.

    These lump sums also don't affect means tested benefits in the same way as other capital so CAB is a really good idea. For example, it's completely ignored when working out entitlement to Pension Credit. The higher state pension income wouldn't be ignored.
    Last edited by jamesd; 28-01-2017 at 5:02 PM.
    • AnotherJoe
    • By AnotherJoe 28th Jan 17, 6:42 PM
    • 5,235 Posts
    • 5,423 Thanks
    AnotherJoe
    Correct, I wasnt aware of that. I'll remove it.
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