State pension deferral - rate of uplift?

br1anstorm

I have searched unsuccessfully on the DWP and Pensions Advisory Service for a clear explanation of the arrangements for calculating the increase in State pension if it is deferred. The rules are due to change in 2016, and I wish to know whether, or how, this might affect my choices.

I will turn 65 (state pension age for men) in a couple of months (early 2015) and have just received the Pension Service letter asking if I wish to claim, or defer, my state pension.

I am married, retired, and receive a pension from my public-sector employer. We have savings (in cash deposits, ISA, etc). So I do not feel that I need to claim my state pension immediately. I am - touch wood - in reasonable health, and hope to live quite a few years longer. So I am considering deferring claiming my state pension for at least a few years.

As I turn 65 before 6 April 2016, I am eligible for the state pension at the current rate. If I choose to defer, that pension will be increased by 1% for every 5 weeks deferred, which is 10.4% for each year .

I have however read recently that with the introduction of the new flat-rate state pension from April 2016, the rate of uplift on deferred pensions will be cut from 10.4% pa to 5.8% pa.

My question is - does this new and reduced rate only apply to those who reach pension age after April 2106 (and thus receive, or can defer) the new flat-rate pension? Or - if I choose to defer my old-rate state pension now - will I get an increase of 10.4% in the first year from 2015 to 2016 and then only an increase of 5.8% in subsequent years?

Putting it another way - if I choose to defer my state pension now, will it be uplifted at the present rate of 10.4% p.a. for as many years as I choose to defer it?

Linton

The smaller deferral rate only applies to people reaching State Pension Age after 6th April 2016 so you are OK.

mjmal51

br1anstorm wrote: »

Putting it another way - if I choose to defer my state pension now, will it be uplifted at the present rate of 10.4% p.a. for as many years as I choose to defer it?

As Linton says above.


Have just reached that age and deferred and intend to do so for 18 months or maybe 2 years.
People retiring after April 2016 will get a lower deferral rate but they will have a higher SP.

br1anstorm

Thanks to Linton and mjmal51 for that reassurance.

I'm in more or less the same position as the latter - about to decide on deferral, probably for a couple of years.

mjmal51

br1anstorm wrote: »

I will turn 65 (state pension age for men) in a couple of months (early 2015) and have just received the Pension Service letter asking if I wish to claim, or defer, my state pension.

One bit of advice, the letter says that if you wish to defer then do nothing. However I did phone to ask a question and they said that if you are deferring they actually prefer it if you do tell them by phone. They then follow it up with a letter confirming the deferral.
This avoids any misunderstanding later on.
When you finally decide to take the pension it is advisable to give them a couple of months notice of the start date.

DancingBadger

mjmal51 wrote: »

One bit of advice, the letter says that if you wish to defer then do nothing. However I did phone to ask a question and they said that if you are deferring they actually prefer it if you do tell them by phone. They then follow it up with a letter confirming the deferral.
This avoids any misunderstanding later on.

Exactly the same happened to me. If they prefer that folk contact them to confirm deferral why on earth does the letter say do nothing?

Numpties.

JohnB47

mjmal51 wrote: »

People retiring after April 2016 .................... but they will have a higher SP.

Not necessarily.

br1anstorm

mjmal51 wrote: »

One bit of advice, the letter says that if you wish to defer then do nothing. However I did phone to ask a question and they said that if you are deferring they actually prefer it if you do tell them by phone. They then follow it up with a letter confirming the deferral.
This avoids any misunderstanding later on.
When you finally decide to take the pension it is advisable to give them a couple of months notice of the start date.

Thanks for that, mjmal51. I decided to ring them to tell them I wished to defer. The lady was very helpful and seemed very clued-up on the rules. She didn't actually say they would write to confirm my decision to defer. But she suggested that it might be useful if they sent me a 'statement of pension' on, or before, my 65th birthday indicating the amount I would be entitled to. That seemed a good idea. She took my details and - I assume - I will get something in the post in a few weeks time!