National Insurance 3A pension boost costs - any news in the budget?

uk1

Again .. wise words. I guess the issue is only resolved for many ( with optins that is ... ) when they decide first how comfortable do they feel about deferring and then is using their cash for 3a - in that order.

If you ave already done the sums, would you mind sharing?

If a person can retire say September 2015 they have two options. Defer for another year or say use cash for 3a. How much do you believe defer beats 3a? It's more than academic because both of us are at that sort of point.

Any thoughts appreciated and welcome.

kidmugsy

uk1 wrote: »

How much do you believe defer beats 3a? .

By a country mile. But you are allowed to do both.

Here's a thought: how do they interact? Does the 10.4% p.a. extra pension also accrue on the additional bit of S2P? That would be nice.

Jaycee_Dove

I do not think it does, except maybe on the basic part of the pension, hence why I was seriously interested in your comments (and getting some rough figures) about how this being true would effect the NIC 3A scenario.


Possibly the only way for a true comparison over more than a year or two.

Problem is knowing how secure such a guaranteed rise would be in perpetuity.

uk1

This has thread has been an excellent reminder of basic principles in that any spare cash is better spent on deferring state pension than buying extra 3a!

If you give up say a year @ £5728 this buys you an additional £596 ie 10.4% but the same cash would by you @ £800 per £1 would only buy you £7.16 per week or £372 per year.

I wonder how long they will alow this deferral rate to continue?

kidmugsy

From the govt document of December 2013

"As with ‘standard’ additional State Pension, this extra additional State Pension will have the following characteristics: ...

• can be deferred – it can be used to build up a lump sum or can be added to the pension, once claimed, through increments …"

So it seems that you will be able to gain by buying the extra additional pension while continuing to defer and so gain on your nice new toy too.

kidmugsy

uk1 wrote: »

I wonder how long they will alow this deferral rate to continue?

The proposed new style SRP was to halve the reward of deferring. There was no mention of changing the rules for people with old style SRPs. But none of it is legislated yet, is it, so it's all uncertain.

uk1

I am probably getting over-excited, but having taken all my savings out of equities at roughly the right time, and being fairly cash fortunate, I currently have a lot of my retirement funds in cash. Luckily through tying it up in long term bonds some time ago my current interest rate is 3.4% including all ISAs and savings accounts.

When these new arrangements come in it strikes me that maxing on 3A and £800 per £1 and deferring it all for as long as my wife and I can may not be a daft use of a chunk of cash. Apart from losing capital (obviously) what would be wrong with that strategy?

kidmugsy

uk1 wrote: »

I currently have a lot of my retirement funds in cash. ...
When these new arrangements come in it strikes me that maxing on 3A and £800 per £1 and deferring it all for as long as my wife and I can may not be a daft use of a chunk of cash. Apart from losing capital (obviously) what would be wrong with that strategy?

As long as you are both old enough to qualify for old-style SRP, deferring is wonderful value. People here tend to say that 2 to 3 years is about best for a man, 3 to 5 for a woman. My wife deferred for 5 years; most of the pension she deferred would otherwise have been taxed whereas she gets most of her extra pension tax-free. I'm deferred at the mo'. I'm also inclined to buy her 3A, depending on the terms finally offered.

These are excellent ways of transforming capital into index-linked income; the only obvious major risk is that a future government will renege on the promises. So make sure that your other investments are not largely with the UK govt - few gilts, or even not much with ns&i, perhaps. Diversification is the thing.

uk1

kidmugsy wrote: »

As long as you are both old enough to qualify for old-style SRP, deferring is wonderful value. People here tend to say that 2 to 3 years is about best for a man, 3 to 5 for a woman. My wife deferred for 5 years; most of the pension she deferred would otherwise have been taxed whereas she gets most of her extra pension tax-free. I'm deferred at the mo'. I'm also inclined to buy her 3A, depending on the terms finally offered.

These are excellent ways of transforming capital into index-linked income; the only obvious major risk is that a future government will renege on the promises. So make sure that your other investments are not largely with the UK govt - few gilts, or even not much with ns&i, perhaps. Diversification is the thing.

My wife and I are both 63 - I'm a few days older - and her pension is currently 3 years deferred. I'm due to receive sp in September 2015. It seems almost designed for us two. It also provides an incentive to beat the system by remaining as healthy as one can.

There is only so much grief that can be sent pensioners direction as it essentially us lot that appoints and fires governments.

kidmugsy

uk1 wrote: »

It seems almost designed for us two. It also provides an incentive to beat the system by remaining as healthy as one can.

Now, now, don't gloat.:)