Pension deferral: conflicting info from DWP

DauntedByDosh

In the guidance booklet you receive shortly before you reach pensionable age, about your pension options, there is a section on p12 'Extra State Pension'. Paraphrased it reads: You can choose to get ESP if you put off claiming for 5 weeks or more. When you do claim you will get a higher pension for the rest of your life. The ESP works out at 1% per 5 weeks of deferral - about 10.4% interest for a full year.'

I rang them and the guy I spoke to confirmed this adding, 'If you don't claim your pension we assume you are deferring it and then, whenever you do claim it, we raise it by the relevant percentage: 1% for 5 weeks, 2% for 10 weeks etc.

Subsequently I've called them twice but on each of these occasions I've been told that you only get the increase if you specifically defer for a year or more at the outset. If, say, you didn't claim your pension until 15 weeks after your 'nth' birthday, you would receive your pension backdated from then and at the original basic rate, not paid from that date, for life, at the 3% increased rate.

Anybody know who's right?

TH1878

The former.

The minimum deferral period is 5 weeks.

Be_Happy

May be some confusion with claiming the deferred pension as a lump sum. You can only take this option if you have deferred for at least 12 months.

DauntedByDosh

Thanks for your replies.

It certainly reads like you can claim at any time and get an extra lifetime 1% for each 5 weeks you defer. And I've since been on the hmrc website which, again, seems to confirm it. But the two following people I spoke to (or it could have been the same lady twice!) seemed so sure of their conflicting facts ...

The confusion isn't relevant to the lump sum for a year's deferral (though thanks for the input). I was quite specific when speaking to the lady/ladies and I even read her the related passage from the guidance booklet. She said she didn't know why the year's deferral caveat wasn't in the blurb (it's not on HMRC's blurb either, as far as I can see) but she was adamant you only got it after a year, less than that and you just got your 'missing' pension backpaid.

I'll go with the majority opinion!

anmarj

if you are talking about extra state pension then it is a mininum of 5 weeks, ie you defer for 5 weeks you get a wee bit extra a week. If you do not claim from your entitlement date but defer less that 1 year you have two options - extra weekly state pension or you claim from your entitlement date and you only get what you would be entitled to with out extra state pension ie if your date of entitlement start 5 january 2012 at £50 per week, you claimed 5 april, you have two options claim from 5 january and get paid £50 per week nothing on top or claim from 5 april and get extra state pension for those weeks you did not claim.

DauntedByDosh

Thank you for that. I'm brimming with pre-pension confidence now.

I've written to DWP politely suggesting they make sure all their staff are singing from the same hymn sheet.

Thanks again.

anmarj

DauntedByDosh wrote: »

I've written to DWP politely suggesting they make sure all their staff are singing from the same hymn sheet.

.

at least you know one person is;)

DauntedByDosh

Just as a PS to this deferral thing ...

Am I right in thinking that if I defer my £100 pension for only 5 weeks it will take almost 10 years of the consequential £101 pension before I break even?! Maths and finance were ever my weak points but that looks correct to me on paper.

If I'm right it seems that the DWP are onto a pretty good thing if anyone other than the superfit defers. And, with my current state of health - I very much doubt I've got 10 years left in me - it surely wouldn't be the wise option. Even if I had that longevity, £1 today will probably only be worth 50p in a decade ...

middlepuss

DauntedByDosh wrote: »

Just as a PS to this deferral thing ...

Am I right in thinking that if I defer my £100 pension for only 5 weeks it will take almost 10 years of the consequential £101 pension before I break even?! Maths and finance were ever my weak points but that looks correct to me on paper.

If I'm right it seems that the DWP are onto a pretty good thing if anyone other than the superfit defers. And, with my current state of health - I very much doubt I've got 10 years left in me - it surely wouldn't be the wise option. Even if I had that longevity, £1 today will probably only be worth 50p in a decade ...

Um, yes, I think your sums are right.

However, for some people the tax situation is a big factor: If you're still earning when you could draw your pension, your pension will be taxed. If you defer until you stop earning, your pension might then be untaxed making the deferral a good option .