MSE News: Guest Comment: What you need to know about the new State Pension

jane52_2

Hi
I was born in Feb 1952 and decided to defer my pension for a year when it become due last January.
Does anyone know if I defer until the 'new' pension comes in will I get that or will I still get the old pension? What effect will this have on the lump sum as well.
I don't seem to be able to get any straight answer from anyone
Thanks Jane

greenglide

jane52 wrote: »

Hi
I was born in Feb 1952 and decided to defer my pension for a year when it become due last January.
Does anyone know if I defer until the 'new' pension comes in will I get that or will I still get the old pension? What effect will this have on the lump sum as well.
I don't seem to be able to get any straight answer from anyone
Thanks Jane

The new State Pension which starts from 6/4/2016 only impacts people who reach SPa from 6/4/2016 onwards.

When you finally claim your pension you will get the old rules pension irrespective of whether it is before or after 6/4/2016. It will not change anything to do with your lump sum.

Why, exactly, are you even thinking about a lump sum? The vast majority of people (but not all) are much better off taking it as an increased pension fully inflation linked and inheritable.

Jaycee_Dove

sylwright wrote: »

I contributed for 42 years and only got my pension at age 61/10months last November. I won't be very happy if my pension ends up worse off than new pensioners will be getting under the new system, but its starting to look like that will be the case.

Its definitely starting to look like the less you pay into this system, the more you get out of it.

I am in a similar position, 42 years contributions reached SPA in May last year. I was entitled to considerably less than the new flat rate - by about £35 pw.


However, by deferring until the date of the new SPA - about 3 years - I will be entitled to more. I will have to defer for about 2 years to get about the same.


So this option was by far the best to take and the per week option seems better than a lump sum given the increases involved.


I am treating this deferral as in effect using what would have been 3 years of pension income as a way to buy an extra £40 - £50 pw of pension income. Something impossible on any other scheme. To achieve that via buying the new 3A stamps would require almost double the expenditure and there is a ceiling that is not as high as I can reach by deferring for 3 years anyway.


So the thing is to not bemoan the fact that the new flat rate might possibly be higher but take advantage of the extra years income due by virtue of a much earlier retirement date than others.


Then use that extra income to its maximum advantage if you can afford to defer. Because the 10.4% extra per week on your pension you get from deferral is halved to all who will qualify for the new flat rate pension and is probably by far the best you could do with that income to boost your future pension.