Deferring Pension

Dizzydotty

I have 2 final salary pensions from former employers payable in about 4 months.


My pension from my current job is also final salary but payable in 2020, or earlier with deductions, and I plan to continue working for a couple more years.


Combined the 2 payable from 2015 are about £4,500, so I will pay about £900 tax.


Is it best to take the pensions and pay the tax or defer them until I give up work when I wont be paying any tax (I will leave work at the beginning of a tax year so will have a year unused tax allowance).


Any suggestions appreciated.

SeekTruth

Different pension schemes have different rules for how much, if at all, pensions are increased if they are deferred beyond normal retirement age.

Do both your pensions increase if they are deferred for, say, 2 years? If so, then how much?

xylophone

Are you permitted to defer them? When do you reach state pension age?

Dizzydotty

I know one of them, the larger one, doesn't increase, would only be a tax saving, the other I'm not sure of.

Dizzydotty

xylophone wrote: »

Are you permitted to defer them? When do you reach state pension age?

Yes I am permitted to defer them. I wont reach state pension age until 6 years after these ones are payable and 1 year after my current employers pension payable

kidmugsy

SeekTruth wrote: »

Do both your pensions increase if they are deferred for, say, 2 years? If so, then how much?

Spot on.

Suppose that they don't increase. Then if the income is surplus, and the tax annoying, you could always make a contribution to a personal pension, with the aim of doing an income withdrawal in that first year of retirement, to use up your personal allowance. You could even make contributions big enough to let you aim to defer your third final salary pension until 2020, or closer to it.

atush

if they dont increase with deferral, why not take them.

And invest 100% of that income into a personal pension?

Dizzydotty

kidmugsy wrote: »

Spot on.

Suppose that they don't increase. Then if the income is surplus, and the tax annoying, you could always make a contribution to a personal pension, with the aim of doing an income withdrawal in that first year of retirement, to use up your personal allowance. You could even make contributions big enough to let you aim to defer your third final salary pension until 2020, or closer to it.

Yes the income would be surplus at the moment but would I still not have to pay the tax on it when it is paid to me if I did that? My thoughts were that I would like the income for my first year of retirement and just want to avoid giving any back to the government ifI can

mgdavid

Yes tax is liable on the pensions when you take them, but if you pay the same amount into a PP or SIPP then the tax is credited back and addded to the PP/SIPP.

Dizzydotty

mgdavid wrote: »

Yes tax is liable on the pensions when you take them, but if you pay the same amount into a PP or SIPP then the tax is credited back and addded to the PP/SIPP.

Thanks, sounds good, will look at that