Deferred state pension

napaul

I have deferred my state pension for the past six and a half years. I'm now 66 and still work and pay standard tax.

When should I start to claim my state pension or when should I take a lump sum?

My deferred pension is only gaining 2% above base rate - less than an ISA.

However, I'm not paying tax on it. Would I pay tax if I claimed it weekly?

Would I be deducted tax if I claim it as a lump sum now? Might that be a hefty loss? Is it best to wait till I don't get taxed - but that's not likely to be till I'm well into my 70s.

It's a predicament. Has anyone advice please?

patanne

You need to check out your options & work out which is best for you. To take as a lump sum, you will pay tax at the highest rate for the year you take it in. Which going by your post would be 20%. Or you can take your state pension with the extra deferred part which after 6 years would be at 10.2% per year or 61.2% more than it would have been.

Which you choose is dependent on your circumstances. If you have debts then you MAY be better taking the lump sum - this also applies if you are not healthy/your life expectancy is not good. But how else can you convert a weekly pension of £107 into a weekly pension of around £172. Even more if you have any second state pension.

So you need to check out your tax liability because I think you will be liable for 20% tax and then see what YOU need to achieve from the lump sum as everyones circumstances are different.

I deferred for 5 years and there is no way my lump sum, even without tax, could have provided me with the additional income. But also I have no partner who might need any lump sum I may leave. Time to get out the calculator, as I said everyones circumstances are different and what has definitely worked for me may not for you. You could look at it like this though, a few years ago they were pushing increased pensions, they are now pushing lump sums. Which is in YOUR best interest.

Please let us know what you decide and why, it may help others to make the decision.