Is it worth it?

ibanez1

I am due to receive my state pension in January 2011 and I have just received notification of possible commencement should I wish to draw this on the due date. Is it worth deferring the pension for one year or not and what are the benefits or pitfalls?

hugheskevi

Is it worth deferring the pension for one year

In general yes, but there is no single right answer - it is a personal decision.

what are the benefits

When you came to draw it, you can choose to take a State Pension which is 10.4% higher or a lump sum which has received interest at base rate + 2%.

The 10.4% option would normally be the better of these as the lump sum option isn't great at the moment due to low base rates (you could get better rates in an instant access saving account).

The lump sum option may be better if you receive Pension Credit or wish to defer receving the lump sum into the next tax year.

or pitfalls?

Taking higher income...you die early into retirement, you don't have enough money to enjoy retirement whilst still young enough to be active, it gets means-tested away, it pushes your income up so you cease to be eligible for means-tested benefits and lose the various goodies that go along with them.

Lump sum - poor interest rate mainly

ibanez1

Thanks for the information it really is food for thought. My intention was to defer for one year and use the lump sum to take the family on a holiday in celebration of my retirement. My main concern was due to the poor return approx 2.5%. I felt that I could probably find a better deal elsewhere as my intention is to use the total amount for the holiday. The holiday plan is actually about 18 months after my 65th birthday. The enhanced pension looks a good option but not for me.:T

seven-day-weekend

Take it while you can, tomorrow may never come.

jenny2009

Take it while you can, tomorrow may never come

Quite right, a friend of mine kept on working after her state retirement age and deferred her pension and 2 weeks before she was due to collect it, she died, and since she was a widow the pension died with her.

She was so looking forward to the money so she could go and visit her grandchildren in Australia, who she had never seen.

It has certainly changed my outlook on life and now if I want something and I have the money, I get it.

paulsad

I'm thinking along those lines - already taken my personal retiremunt fund (if you can laughingly call it that as it only produces about five percent of what I was promised all those years back) at 50. If I'd have left it another 10-15 yrs from what I can see - yes it may have been worth £50 a month more BUT with inflation etc whats the point AND there's no guarantee I'll be around to spend it - may as well use it now when I need it to at least help out with the monthly bills. My lovely mum in law died at 64 and my own mum in her early 70's so all this deferring can backfire.

ibanez1

Thanks.:A Many of your answers just confirm what I have been thinking since posting. I have indeed decided not to defer. Tomorrow may indeed come but of course I might not be here to witness the event. Ever the cheerful one!! I have been very fortunate in so many ways and look to enjoy each day. My glass remains half full.:beer:

begbeer

If you carry on working and earn good money taking your pension could take you into a higher tax bracket