advice for my dads state pension and defering?

missscousemouse_2

hi
my dad has just called and asked if i could find out about his state pension. he is 65 and decided to defer his pension this yr.
he said he has been hearing this may not be a good move. he wants to know if he would be better taking it now or carry on deferring for the next 2 yrs.
mum mum and dad don't have any money and im worried he will lose out
many thanks for looking

xylophone

Is your father intending to continue working for the next two years?
http://www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@dg/@en/@over50/documents/digitalasset/dg_200597.pdf

missscousemouse_2

he planned on working for another 2 or so years, but if it wont be worth it he will get his pension.

atush

Well, they have no money. does this mean no private pension too?

What he could do, is defer one year or 2 then get the deferred amt as a lump sum which could help with the whole no money thing. Or a higher income for life which perhaps they could save.

The other option is, if they can live on what they are earning, they could take the pension and immediately put it into a regular saver acct(so they don't spend it).

Does he have any serious health issues?

luvchocolate

if he is working and takes his state pension chances are he will be paying tax on that, if he defers his state pension until he gives up working he may not be in the tax bracket.

Linton

missscousemouse wrote: »

he planned on working for another 2 or so years, but if it wont be worth it he will get his pension.

In pure cash terms assuming your father will die at the average age then deferring the state pension is definitely worth it. If you defer for one year in subsequent years the pension is increased by 10%. So you get your pay back after 10 years or so. Since life expectancy at 65 is around 20 years you will be profit by the time you die. Crudely the break even point is 10 years, at which point you get twice the income for half the time. The optimum is 5 years delay at which point, after 20 years, you get a total of 12.5% extra income compared with no delay. After 4 or 6 years you get 12% extra.

However taking into account tax, inflation, the ability to invest money you havent used to gain extra income etc etc things get rather more complex.

mgdavid

in general if one can work beyond 65 it is well worth deferring state pension as the enhancement is far better than taking it and investing it.