Pension Boosting article discussion

jem16

kwikbreaks wrote: »

If we deferred our state pensions until the new flat rate is introduced would we get that or would it be the £110 + deferral increase?

It would be the £110 + deferral increase.

makemdano

Monkston
The whole subject of State Pension from 4/2016 is very ambiguous. Although a flat rate is proposed this will be reduced for those in contracted out employment PRESUMABLY on a pro rata basis. As you were contracted out while "qualifying" for HRP the qualifying years would count as contracted out and therefore reduce your pension accordingly - this is a considered opinion and no one seems to be able to provide me with any facts
If you paid into the Grad system (GRP) you will have benefit from that but this will be superseded by the new rules in 2016 (I think)
The spirit of the new rules is that no one should be worse off so get an online State Pension Forecast asap so you can compare when the time to claim arrives.

In typical political fashion the new system will be sold to we voters as a great financial benefit which of course it isn't and is just political deceit to cover up the latest means of taking money from people who may not be in a position to make up the deficit.

The big issue I take with all of this is that retirement is probably the last major financial decision you will take from which there may be no turning back. Most of us have been planning for this for decades and yet those in power are continually chopping and changing making it very difficult to effectivley forecast what your income will be on that final date

Its even worse for women who are also losing the benefit of being able to retire at 60

gadgetmind

makemdano wrote: »

those in power are continually chopping and changing making it very difficult to effectivley forecast what your income will be on that final date

These changes are designed to help counter that be simplifying the system. You may not like the chosen approach, but I'm sure that it will have been clear when you read (and responded to?) the Green Paper, that there really wasn't any easy way to clear up the tremendous mess that was state pension.

Its even worse for women who are also losing the benefit of being able to retire at 60

Out of interest, would you care to hazard a guess as to when this change was announced?

expat_mike

In my opinion its a very risky option to hold off taking the state pension as its a minimum of 7-8 years before you break even even assuming there's no tax implications. If you have a private pension that you can defer or better yet, you're an expat with a QROPS, its far better to defer that pension and reduce your tax liability. Your pension pot remain intact for your heirs should you die after 5 years unlike the lost years of your state pension that will be unrecoverable from the state.

Then there's the changes in tax and state pensions that every government tinkers with that who knows what may happen in the future. Private investments at least have a contract you can sue over if they break the conditions but obviously not with the state pension.

By and large, once you're in receipt of a state pension, governments wont mess with it so go for the 'bird in the hand' at retirement age, save the pension if you don't need it and the HMRC wont be able to touch your savings (under IHT rules).

expat_mike

kento wrote: »

Deferring state pension isn't a simple calculation.

You may have tax issues, it may be beneficial to avoid paying tax on state pension income now because other income is making it taxable.

On the other hand the extra state pension later in life may not produce an real extra income if you became entitled to minimum pension in any event.

What about the impact of drawing down savings capital rather than taking pension?

Finally, governments are prone to altering pension regulations, witness the forthcoming reduction to 30 qualifying years, so its hard to predict what might happen. For instance you might speculate that if the recession bites harder the working generation struggling to pay off government debt through higher taxation would look favourably on a political party looking to be even more frugal with pension spending.

Couldn't agree more about governments changing the goal posts as this is exactly why we're in a pensions mess in the first place.

If you have sufficient tax paid savings it certainly makes sense to me to draw down on that as there are no tax implications as it has nothing to do with the HMRC. However, by doing this, I've managed to keep my tax threshold just below the 10,500 limit and avoid paying any tax quite legitimately. With a full state pension and a miniscule private pension there's no tax to pay and my savings top up my spending needs.

expat_mike

RichOxon wrote: »

I'm 28, have 9 qualifying years, and have the option of buying up to 3 more years, which will cost me a total of about £900 (one of them I already have partial credit for).

I'm planning on emigrating soon, so I may never reach the 30 qualifying years that I'd get from continuing to work in the UK.

I know I can claim my UK pension from the country I'm emigrating to.

Can I still accumulate qualifying pension years from keeping my UK business open? If I can, then it's a much cheaper way of picking up qualifying years than paying out that £900 now.

Does anyone know if that is possible? Can I live in another country, but still keep paying my Class 2 (Self-employed) National Insurance contributions, and in doing so accumulate those qualifying pension years?

Any advice appreciated! :-)

To be honest my experience of getting straight answers to simple questions from the DWP is nigh on impossible. Personally, I'd play safe and keep your UK business open to ensure you get the 30 qualifying years. Also there's a minefield of rules if you move to another EU country regarding tax residency which could also come back and bite you. My advice is to 'work' for the 6 months and a day in the UK to satisfy both the UK authorities and wherever you might move to outside the UK.

Arthurian

I was caught in the trap of not knowing whether to top up some missing years' NI contributions, due to the government changing the goalposts on retirement age and the move to 35 years contributions needed. Fortunately, they have just extended the time allowed for top-up contributions to be made, to accommodate such cases.
From http://www.hmrc.gov.uk/ni/volcontr/whentop-up.htm#1

Extended time limits for the tax years 2006 to 2007 to 2015 to 2016
If you are affected by the changes to simplify the State Pension you have more time to pay voluntary Class 2 or Class 3 National Insurance contributions for the years from 2006 to 2007, to 2015 to 2016. The extended time limits apply if:
you reach State Pension age on or after 6 April 2016
and you make payment by 5 April 2023
The extended time limits are:
for voluntary Class 3 contributions, if you make payment by 5 April 2019 you will pay the contributions at the rate that applied in 2012 to 2013 tax year for the tax years 2006 to 2007, to 2009 to 2010
for voluntary Class 2 contributions, if you make a payment by 5 April 2019 you will pay the contributions at the rate that applied in 2012 to 2013 tax year for the tax years 2006 to 2007, to 2010 to 2011
for the remaining years up to and including 2015 to 2016 higher rate provisions will not apply until 5 April 2019
if you make payment after the 5 April 2019 the rates may have increased

I understand, from the Pensions Service, that further clarification will come later this year.

timpin

Can anyone help ?

I am a male due to retire in May 2017, however the Government is changing the minimum pension to £144 per week from April 2017, so I believe. Can anyone tell me if I will still get my secondary state pension on top of this ?

bigadaj

timpin wrote: »

Can anyone help ?

I am a male due to retire in May 2017, however the Government is changing the minimum pension to £144 per week from April 2017, so I believe. Can anyone tell me if I will still get my secondary state pension on top of this ?

There are transitional arrangements so you shouldn't lose out. The calculation will be done on the old and new arrangements and you should get the better option.

kidmugsy

timpin wrote: »

I am a male due to retire in May 2017, however the Government is changing the minimum pension to £144 per week from April 2017, so I believe.

That was the original plan; it's now to be April 2016. So perhaps the new scheme will be debugged before it affects you.