State Pension Deferral

scarborian

Help or advice please.

I am due to retire in May of this year but had planned to defer my pension for 12 months to get a lump sum payment.My wife is retired and in receipt of her State Pension and Pension Credits I am in part time work working 12 hours a week.
I am a bit confused now because it seems that as my wife is in receipt of Pension Credit it has trown a spanner in the works so to speak.The leaflet I received in the post from the pension service is very vague and confusing. Am I right in thinking that if I defer my pension my wife will not get pension credits for the 12 months or when I get my lump sum will the amount of pension credit over the 12 months be deducted from the lump sum payment.I am very confused,or will I not be able to defer my pension at all.

Whiteknight

If you defer your State Pension the amount you are due from your pension would be taken into account for the Pension Credit that your wife gets for you both.

And you would not be able to build up a lump sum.

sleepless_saver

"From April 2011 some further changes were made. Now any days that you or your partner receive the following benefits will not build up extra State Pension or a lump-sum payment while you are putting off claiming State Pension:

• Income Support
• Pension Credit
• Employment Support Allowance (income related)
• Jobseeker's Allowance

(income based)"

Source: Pensions Advisory Service

So no point deferring unless you are getting other benefits as a result of getting pension credit, when it would be worth investigating further.

canaster

There are various scenarios involved when considering whether or not to defer your state pension. Without knowing more facts about your situation one can only make assumptions which may be wildly inaccurate.

As you now know you cannot continue to claim pension credit and qualify for a lump sum.

However, if you were to stop claiming pension credit you could defer your state pension and get the lump sum. This would mean living on your savings, if you have them, as well as your wife's pension. But you would be able to claim for housing benefit and council tax rebate, on low income grounds (and also get free dental treatment and other freebies). A deferred pension is ignored for these benefits.

You would need to feed the different scenarios into an online benefits calculator to see whether it is worthwhile to defer your pension.

If you stand to lose a lot from not claiming pension credit, and/or, if you do not claim housing benefit, then it is hard to see how you would benefit from stopping the pension credit and going for the lump sum.

But it is worth considering in certain situations, if the circumstances are favourable.

firesidemaid

also, once 65 your income tax allowance increases greatly - if that is something that would affect your calculations.

sleepless_saver

Depending on your joint income and savings you may still be entitled to pension credit when you get your state pension.

If you go along to CAB, or local welfare rights, you can get them to check this out for you, along with the impact of deferring (assuming you have a pension forecast and know how much you will be getting).