State Pension Quandry

Luckyspal

Dear All

I hope someone can help me with advice regarding my state pension or tell me where to get the best advice. I have set out the details below:

I am female and qualified for my state pension in October 2009. At that time I was advised that I would only receive 75% of the full pension because I had insufficient contributions. This situation arose because my husband worked abroad for a few years and I did not work during this period. Although I was at home looking after our only child I was unaware that I could have claimed child allowance. These years could then have been counted later as contributions. I have subsequently paid additional NI contributions to the maximum allowed to increase my pension but am still short of the 39 years for a full pension.

I have also deferred my pension until October of this year (4 years) to try and increase it. This is where I am in a quandry.

As far as I am aware I am 6 months too old to qualify for the Government’s standard basic pension of around £144 that should come into effect in 2016. However, the 4 years I have deferred my pension would result in me receiving just in excess of a full basic pension (106%). Now I also have the option of taking a lump sum and receiving 75% of the basic pension. My question is what is the best option? Is there a chance that the Government may change the rules and pay everyone in my position a full basic pension? In which case should I take the lump sum? Or should I just take the weekly increase?

A bit long winded but I hope this is clear and someone can help. Many Thanks.

LuckysPal

Stargazer57

Luckyspal wrote: »

I am female and qualified for my state pension in October 2009.
...
As far as I am aware I am 6 months too old to qualify for the Government’s standard basic pension of around £144 that should come into effect in 2016.

The proposed changes only affect those who at below state pension age when they commence. If you reached SPA in October 2009 you will be several years to old to be affected, not just 6 months. I would say that the chance of any changes being backdated to cover those who reached SPA seven years before is so small as to be negligible

Newly_retired

There is no right or wrong answer here.
Personally I would not count on any change of plans that might allow you to get the fixed rate pension of £144 in 2016, as I believe you qualified for SRP too early for that.
You have already chosen to defer.
If you take the lump sum, remember it is taxable, so take into account your tax situation at the time you may plan to take the lump sum, though it should only be taxed at your highest rate at the time ie should not push you into a higher tax bracket.
If you have good use for a lump sum, eg towards a house purchase, home improvements or new car, this is a good opportunity. [ My husband has just taken his lump sum and changed his car].
However if you have no debts, and no particular plans for the money, what will you do with it? Interest on savings is poor. what is your attitude to investment risk?
On the other hand, if you feel you have good health and potentially a long life expectancy, getting a better pension for the rest of your days may be a better choice. Nobody can foretell the future of course. I chose to take my deferred pension as a weekly extra amount, which brings me up to nearly full SRP, as like you I fell short by a number of years. My mum lived to 92, so maybe I will too?
I think there is a calculator somewhere but as I recall it might take me about 8-9 yrs to gain the same amount as the lump sum, so I should be quids in!
But I also get a decent occupational pension as well- so my choice could have gone either way. I have no regrets.
Hope this helps.

kidmugsy

The great thing with the extra pension is that it is much the most cost-effective way there is of buying protection of your income from inflation. Ignore those people who run spreadsheets "modelling" what will happen if there is 3% p.a. inflation and then pontificate about what to do. They ignore inflation spikes like those of the 70s in their models, but you are also covered against them.

Luckyspal

Stargazer57 wrote: »

The proposed changes only affect those who at below state pension age when they commence. If you reached SPA in October 2009 you will be several years to old to be affected, not just 6 months. I would say that the chance of any changes being backdated to cover those who reached SPA seven years before is so small as to be negligible

Many thanks. Sorry I was not clear, when I said 6 months too old I was really referring to the 30 years contributions requirements change. I wonder if in future the Government may reconsider and open this up to people like me who miss out.

Thanks again

Luckyspal

Newly_retired wrote: »

There is no right or wrong answer here.
Personally I would not count on any change of plans that might allow you to get the fixed rate pension of £144 in 2016, as I believe you qualified for SRP too early for that.
You have already chosen to defer.
If you take the lump sum, remember it is taxable, so take into account your tax situation at the time you may plan to take the lump sum, though it should only be taxed at your highest rate at the time ie should not push you into a higher tax bracket.
If you have good use for a lump sum, eg towards a house purchase, home improvements or new car, this is a good opportunity. [ My husband has just taken his lump sum and changed his car].
However if you have no debts, and no particular plans for the money, what will you do with it? Interest on savings is poor. what is your attitude to investment risk?
On the other hand, if you feel you have good health and potentially a long life expectancy, getting a better pension for the rest of your days may be a better choice. Nobody can foretell the future of course. I chose to take my deferred pension as a weekly extra amount, which brings me up to nearly full SRP, as like you I fell short by a number of years. My mum lived to 92, so maybe I will too?
I think there is a calculator somewhere but as I recall it might take me about 8-9 yrs to gain the same amount as the lump sum, so I should be quids in!
But I also get a decent occupational pension as well- so my choice could have gone either way. I have no regrets.
Hope this helps.

Many thanks. Sorry I was not clear, when I said 6 months too old I was really referring to the 30 years contributions requirements change. I wonder if in future the Government may reconsider and open this up to people like me who miss out.

Thanks again

Jack_Griffin

The current requirement is 30 years NI for the full £110 basic pension, to which you add the additional pension you have.

From what the pensions minister said when the new fllat rate pensions were announced they won't be allowing anyone to use the new rates if they'd benefit.. so I think your rate will already be determined, plus any increase for deferring..
https://www.gov.uk/deferring-state-pension/what-you-may-get

Did you get a state pension statement? You should be able to send off for one.
https://www.gov.uk/state-pension-statement

Luckyspal

Jack_Griffin wrote: »

The current requirement is 30 years NI for the full £110 basic pension, to which you add the additional pension you have.

From what the pensions minister said when the new fllat rate pensions were announced they won't be allowing anyone to use the new rates if they'd benefit.. so I think your rate will already be determined, plus any increase for deferring..
https://www.gov.uk/deferring-state-pension/what-you-may-get

Did you get a state pension statement? You should be able to send off for one.
https://www.gov.uk/state-pension-statement

I did request and get a statement last year but it was incorrect. I requested a new statement last week. I just can't get my head around the fact that if I was 6 months younger I would have only needed 30 years to qualify for a full pension rather than the 39 I need. I keep thinking that the Government will revise this situation in the future and that I may have deferred my pension needlessly.

anmarj

from what I understand if you become state pension age after the implementation you will fall under the new rules, as you became State pension age in Oct 09, you fall under the current rules. if you claimed in May 2016 it would be based on your retirement age of Oct 09. It will not be retrospectively applied, nothing ever is, there will winners and there will be losers