Problem with deferred state pension lump sum

Elizabetta

Would be glad of any advice. I deferred my state pension in 2008 as I had found part-time work, This was the second occasion I had deferred and I was informed at the time by Pension Service that deferment could be done twice but not more.
When I finished work seven weeks ago I applied to receive state pension together with lump sum accrued for past two years (which I had earmarked for a specific purpose).
Although I have received weekly state pension for past 3 weeks I have not received any news of the lump sum. After several fruitless phone calls I was informed yesterday that in fact a person can only defer state pension ONCE. It seems my case is now with a decision maker for consideration of whether or not I will receive the lump sum!! I am speechless and beside myself with worry as I thought the lump sum was absolutely safe and guaranteed. Any ideas please?

placido

My understanding is that you can only defer once. So seems like you were misinformed when told you could do it a second time.

When deferring you are basically just saving your own money and getting an attractive rate of interest.. It is not a government handout. So you are just asking for your own money back.

My impression is that the Pension Service generally gives claimants the benefit of the doubt in pension deferral issues. I have heard of several cases where claimants have been “over-paid” but never “under-paid.”

Perhaps a letter to the Pension Service clarifying the circumstances in which you were misinformed may help him or her to reach the (in my view) proper conclusion that this is “official error”

Elizabetta

Thanks for that Placido. I will write to them. Yes, I am aware it is my own money - not a handout. What puzzles me is this: if a person cannot defer more than once, why was I allowed to do it twice? Who would voluntarily choose not to receive their state pension in the knowledge that it was not accumulating towards either a lump sum or increased weekly pension in the future?

placido

Elizabetta wrote: »

Thanks for that Placido. I will write to them. Yes, I am aware it is my own money - not a handout. What puzzles me is this: if a person cannot defer more than once, why was I allowed to do it twice? Who would voluntarily choose not to receive their state pension in the knowledge that it was not accumulating towards either a lump sum or increased weekly pension in the future?

Why were you allowed to do it twice? Probably because the Pension Service’s own staff do not always understand the rules.

The confusion may arise because; a pensioner is allowed to draw their pension, and then stop, and defer their future pension. A pensioner is also allowed to defer their pension and then claim the pension (and lump sum) and then if they change their mind (within a time limit) they can continue to defer their pension as long as they repay the lump sum. This is not the same as being allowed to defer your pension twice; but may have been interpreted as such.

Part of the problem arises, I think, because pensioners have to claim their pension and if it is not claimed then it is assumed that the pension is deferred. This means that the pension service do not always pick up on people who perhaps should be claiming but are not.

For example, there have been cases reported of male pensioners; who had been claiming pension credit from the age of 60+ who did not bother to claim their retirement pensions at the age of 65 (as they did not think it would be advantageous to them). The pension service did not pick up on this and later they have been informed that their pensions were counted as deferrals and consequently they received considerable lump sums.

According to the pension credit rules their pensions should have been counted as “notional” income but because of the way in which the pension deferral rules were framed a “loop-hole” arose which led to the several cases of “over-payments” to which I referred in my first post.

If people are getting lump sums to which they are not (strictly speaking) entitled, then I do not see how they can possibly not pay you what you are owed.

cheekyreddevil

The pension service at the moment are having a nightmare and a huge back log of lump sums/deferred pensions.
My Mum who was 65 in February 2010, has still not had her letter saying what she will get for a lump sum or deferred.

The pension office every time she phones gives a different answer. Today she was told the reason for not having the letter is because they have to get in touch with all the places she has worked at, for tax purporses, then calculator it together before the letter is sent out, BUT Mum should have had her letter by now and they can't understand why this hasn't happened.

Have now been told to give them a week and it should arrive, if not ring them back this Friday where they will look into this. :mad:

Mum was also told that when the pensions office get the letter back saying what she wants to do (lump sum or deferred) then the worst case is she will have to wait 8 weeks before it is sorted out!!!!!... :eek:

anamenottaken

cheekyreddevil wrote: »

The pension service at the moment are having a nightmare and a huge back log of lump sums/deferred pensions.
My Mum who was 65 in February 2010, has still not had her letter saying what she will get for a lump sum or deferred.

The pension office every time she phones gives a different answer. Today she was told the reason for not having the letter is because they have to get in touch with all the places she has worked at, for tax purporses, then calculator it together before the letter is sent out, BUT Mum should have had her letter by now and they can't understand why this hasn't happened.

Have now been told to give them a week and it should arrive, if not ring them back this Friday where they will look into this. :mad:

Mum was also told that when the pensions office get the letter back saying what she wants to do (lump sum or deferred) then the worst case is she will have to wait 8 weeks before it is sorted out!!!!!... :eek:

This seems nonsense. AFAIK Tax has got nothing to do with pensions, NI has. BUT, she would not have been paying NI for five years (since age 60), so what do they have to check? That would have been dealt with years ago. What if her employers have ceased trading since she left?

hugheskevi

This seems nonsense. AFAIK Tax has got nothing to do with pensions, NI has. BUT, she would not have been paying NI for five years (since age 60), so what do they have to check? That would have been dealt with years ago. What if her employers have ceased trading since she left?

National Insurance (NI) has nothing at all to do with deferral - NI determines how much State Pension you are entitled to, which was as you say calculated years ago.

The lump sum paid is taxable, so presumably they are trying to calculate what the correct rate of income tax to apply is.

Mind you, I would have thought that would be a HMRC thing, not the pension office.

cheekyreddevil

anamenottaken wrote: »

This seems nonsense. AFAIK Tax has got nothing to do with pensions, NI has. BUT, she would not have been paying NI for five years (since age 60), so what do they have to check? That would have been dealt with years ago. What if her employers have ceased trading since she left?

That was what my Mum said after putting the phone down, as 2 of the places she worked at are no longer there....
All we can do is wait till Friday, if no letter arrives then phone them again...

placido

So there is a back log and every time people phone in they get a different reply? Seems to me that the people on the other end of the phone don't know anything about specific cases and are just talking in generalities.

Yes! NI contributions are an important factor in determining the amount of state pension payable; but as others have said that should have been sorted when the pension was first payable. Obtaining a pension forecast before you retire is so important.

If the pensioner and the pension service agree on the amount of state pension payable then (it seems to me) the rest should be routine.

First step is to decide (after pension deferral) the precise date on which you want the pension to be paid. You should of course give plenty of notice.

Once deferral period is over and pension payments in place they can start to do the math. My guess is they have some sort of software calculator that they feed the figures in to in order to arrive at the lump sum and amount of pension increase's.

If there are no complications then they send out the letters notifying claimants of the amounts; within about three weeks of first pension payment.

When you get the letter you have to sign the form stipulating whether you want the lump sum or the pension increase.

If you opt for the lump sum you have to give an estimate of your income for the tax year in which you are claiming the lump sum. Then you return the form to the pension service.

I can only guess what happens then but it would seem probable that the pension service then send your estimate to HMRC for approval.

That is where I am up to at the moment; still waiting to get my hands on the cheque.

Just one word of advice. The pension service do not send acknowledgements. So if a letter you send gets lost in the post you wont know about it for weeks. Send the important letters by recorded or special delivery.