What's the number ?

madeinireland_2

Hi

I have a final salary indexed linked pension and I will retire sometime in the next couple of years. I am 53.I am planning to defer the pension for approximately 3 years. As a result of deferring the pension I think it will increase my annual pension by about £2.2k / year.

So something I've been thinking about is should I defer it for longer if I have the means to support myself for longer ?

So what would be a good way of working out what that increase is worth in monetary terms to help me work out the merit of delaying further and indeed should I not burn my savings by deferring for so long ?

e.g. If my costs / year amounted to £35k is the £2.2k increment worth it ? What is the maximum costs that make it worth it ?

Thanks.

Perelandra

Need a bit more information-


Is that £2.2k flat, or index linked
Are there any benefits if you die (like a 50% spouse pension?)

madeinireland_2

Hi,

Its fully index linked with 50% spouse pension

Thanks.

Perelandra

One way to look at it is "how much would I have to pay to buy a £2.2k annuity, index linked, 50% spouse at my age". And it's about 75K


Source: http://www.ft.com/personal-finance/annuity-table

madeinireland_2

Ah yes I suppose thats a good way of doing it - so it looks like the longer I can defer the better then.

Thanks.

jamesd

Generally it looks as though deferring is likely to be a good idea, subject to income tax effects and whether you need the money you'd be spending to live on. I'd be happy to do something like using a mortgage to be repaid from part of the higher ongoing income to fund something of this sort.

kidmugsy

If deferring were to let you get the pension above £20k p.a. it opens the possibility of using Flexible Withdrawal on a personal pension of some sort. (The £20k cut-off will be reviewed by the govt from time to time.) That effectively gives you another useful tax shelter to use before the tax year when you actually enter flexible withdrawal.
http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm09103590.htm