Deferred (State) pension help needed!

The_General_2

Hi,

My mother-in-Law is due to retire in September, at which time she can start claiming both her state and Private pensions!

Now, We have been discussing the relative merits of deferring her State pension in order to get a higher weekly payment later in life (Along with the lump sum).

Now, Has anyone any experience of doing this? Is this deferral only benificial to people who want to work longer?

Should she claim both pensions as soon as possible?


Thanks



The General

EdInvestor

Hi General

Should she claim both pensions as soon as possible?

Most advice I've seen suggests that the state pension deferral option is not beneficial.
Has she yet applied for a state pension forecast to find out how much she will get?

As to the private pension, more details would be needed to assist here.If she is planning to convert her private pension into annuity (after taking the 25% tax free cash), she should shop around for the best rate, start by having a look at the annuity tables on the FSA site.

https://www.fsa.gov.uk/tables

If she is a smoker, overweight, or suffering from any serious illness she can get a better rate through an "enhanced" or "impaired life" annuity.

There is also an option to take her money in the form of "income drawdown" which means she keeps her capital invested rather than giving it up for an annuity paying an income for life.

Cardew

I have been looking at the pros and cons of deferral of State Retirement pension.

There clearly is merit in deferral past retirement age if you continue working AND are in the 40% tax bracket.

Whilst an increase in pension of 10.4% for each year of deferral seems attractive, there are so many unknown factors to consider. e.g. future interest rates, future pension increases, future income tax rates and lastly how long you will live.

If future inflation and interest rates are low and you 'intend' to live to a ripe old age then it is probably worth deferral.

However 'Bird in the Hand?'

DavidLaGuardia

Using a return of 5% on funds held and an annual pension increase of 3% I make it nearly seventeen years before you break even for the first year deferred. You may use different figures but, that the earlier half of retirment is for most people more "active" than the second half needing more money (long term care being an exception here but it depends on what your own arrangements are) I would rather go for a bird in the hand [afterall.... it gathers no moss ]

djohn2002uk

If she doesn't need it yet, then take it now and invest it each month in one of the Regular Savings Accounts, which are about 7% now giving her roughly 3.5% on the whole amount at the end of the first year. That takes care of the first years payments instead of deferral and probably more beneficial.