pension deferral subtlety

kidmugsy

Seektruth posted a link today in which I found:

"Individuals who reach State Pension age before the
implementation of the single-tier pension will continue to be able to defer their state pension in line with current rules. This will include the provisions that permit their surviving spouse or civil partner to inherit a deferral reward from them, whether that surviving spouse is covered by the current or single-tier system."

For couples, on average it will be the younger one who is likelier to be the survivor, and the younger one who may get the new-style pension. Getting a bigger state pension while also being able to "inherit" a deferral reward from the older spouse would be a pretty attractive combo.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181229/single-tier-pension.pdf

greenglide

and conversely being the older of the couple with a SPA in May 2016 any deferral, earned at the new rate, isn't even inheritable.

Additionally under the old rules my AP would be inheritable (at 50%) whereas this drops by over £30 a week as only the protected payment is inherited.

The one good point is that that same sum from current CAT-A basic to STP amount is uprated by the triple lock rather than CPI.

kidmugsy

greenglide wrote: »

being the older of the couple with a SPA in May 2016 any deferral, earned at the new rate, isn't even inheritable.

I'm mildly surprised that this beef, for which I have a good deal of sympathy, hasn't received more publicity. Meantime we get plenty of dunder-headed whinging about the increases in pension age, as exemplified by another current thread.

greenglide

I assume that the majority of the population isn't really aware of this coming change and the inheritance change I suspect very few people will know.

I have heard it suggested that the class 3a increments will not be inheritable either but I assume this is a mistake although this comes from a source that really, really ought to know.

SeekTruth

greenglide wrote: »

...
I have heard it suggested that the class 3a increments will not be inheritable either but I assume this is a mistake although this comes from a source that really, really ought to know.

See quote below from https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/265390/v2_mw__20131211_policy_brief_formatted_FINAL.pdf

People who take up Class 3A will receive extra additional State Pension in return.
...
This extra additional State Pension will be added to people’s existing pension payments.... As with ‘standard’ additional State Pension, this extra additional State Pension will have the following characteristics:
•
increased annually by any increase in prices (except if the person lives in a country where the UK State Pension is not uprated);
•
inheritable on death – a surviving spouse is entitled to at least 50% of the additional State Pension;
•
can be shared on divorce as part of a pension sharing order;
•
can be deferred – it can be used to build up a lump sum or can be added to the pension, once claimed, through increments; ...

greenglide

I know. It was the contradicting of this that I found very, very odd.

I assume it was simple incompetence (until the publicity surrounding the launch starts later this year).