State Pension Deferral

kidmugsy

saver861 wrote: »

Other than emotive reasons of retention for spouses etc

You don't look upon protecting your spouse as being your duty, then? Lucky her.

saver861

kidmugsy wrote: »

Then you must have made some odd assumptions. More realistically you break even at about ten years after (re)starting the pension, not fifteen. Which is why people who can do arithmetic or algebra tend to think it's a ruddy good deal, and why it will be modified under the new style pension regime to make it less expensive for the taxpayer.

Ah right .... them that's clever with two times tables and the old quadratic equations have it all sewn up ... nice one.

Me .. well where I lose in intellect I make up for in good looks ... well ya know .. gotta have something ....

Anyhooo ... £6,000 state pension - deferred for a year gives said deferred £6,600 per year there after at said 10%. Meanwhile non-deferer (new word for dictionary) has his £6,000 at end of year one. Bangs that away at 3% per year giving him about £6,180. Said deferer taking about £420 per year more than said non-deferer. £6,000 divided by £420 = 14.2857142857 years.

Both are indexed but I've not bothered about the old inflation, and complicated things like that - thats for them thats clever with them things. All simples like .....

saver861

kidmugsy wrote: »

You don't look upon protecting your spouse as being your duty, then? Lucky her.

Well ya see ... thats what I'd say was jumping to a conclusion ....

That said, you are right, I keep reminding her every day how lucky she is ...

As for the financial point, as stated, the preference is to have the greater amount of money earlier in our retirement. If one of us pops it at the break even point, then the survivor has everything. As we stand the assets will provide comfortably for the remainder of the survivors time ...

kidmugsy

saver861 wrote: »

Bangs that away at 3% per year

Are you assuming that loss leader accounts will continue indefinitely?

Anyway, why assume that you are going to save it when your plan is apparently to spend it?

saver861

kidmugsy wrote: »

Are you assuming that loss leader accounts will continue indefinitely?

No - not necessarily. Should they cease then you would look at the next option. Perhaps a three year tie in. I think its reasonable to assume something in the region of 3% but even 2% would give you nigh on 13 years to the break even point.

kidmugsy wrote: »

Anyway, why assume that you are going to save it when your plan is apparently to spend it?

Well in real terms for the purpose of this demo both options give the same results i.e. near 15 years to break even.

If I spend it, I have had the benefit of whatever I spent it on.

If I take it and invest it in high risk then I might lose it all or I might have a healthy profit at the end of the 15 years. Its all relative ....

What it isn't is a 10% deferred increase does not match up to a 10 year break even point. ... quite apart from having the cash in hand by taking it up front.

patanne

I don't know how you got the figure of 18 years to break even. Remember that you are not getting 10% on what it would have been, but 10% on what it will be when you take it. Take last year, if your basic & additional totalled £120, then the next year if you had taken it would be £123 but if you had deferred it would be £147.60. If you can make that with a savings account then congratulations. It is a very good deal, provided of course you are fit & well & don't actually need the money.

I deferred for 5 years and have never for one moment regretted it. It has also enabled me to retire on more than I was earning (a few years on 4 day weeks due to the economy). The lump sum however is not such a good deal.

saver861

patanne wrote: »

I don't know how you got the figure of 18 years to break even. Remember that you are not getting 10% on what it would have been, but 10% on what it will be when you take it. Take last year, if your basic & additional totalled £120, then the next year if you had taken it would be £123 but if you had deferred it would be £147.60. If you can make that with a savings account then congratulations.

Well it seems I'm as equally confused as you are.

I did say earlier though that my good looks far outweigh my intellect .... :cool:

I done a very basic calculation on a pension of £6,000 all other things being equal and thus all relative.

However, taking your point, £120 last year would be £123 this year with the 2.5% minimum triple lock rise. If I had deferred, then it will be 10% on top of the current rate of £123 i.e. £123 + 10% equals £135.30. Thus I'm nowhere near clear how you get that to £147.60??? The 10% only kicks in from year 2, i.e. when you start the pension after the one year deferral. It seems to me you have added two lots of 10% i.e. 20% for a one year referral. I don't think HM Treasury is that generous to be honest!

The 18 years I was referring to was about some occupational pensions with actuarial reductions etc and not the State Pension.

Bettie

I have deferred and continue to work so pay tax but I am hoping to pack in work one day in a year or so, then the following year I will have income ( from other source) less than the personal allowance. When I take my lump sum -as I have read it, then I will pay no tax on it as I wont be a tax payer.
If I am wrong then I will take the second option of higher pension

patanne

Whoops - I should never do these things when tired. £135.30 agreed.

Still a good deal though. I still haven't taken my admitted small private pension though as the year I was going to take it it fell through the floor AND they changed the annuity rates, which between the two took a good third off it.

saver861

Bettie wrote: »

I have deferred and continue to work so pay tax but I am hoping to pack in work one day in a year or so, then the following year I will have income ( from other source) less than the personal allowance. When I take my lump sum -as I have read it, then I will pay no tax on it as I wont be a tax payer.
If I am wrong then I will take the second option of higher pension

Indeed everyones situation is unique so adding circumstances, and tax issues etc. can make deferral a good option. Taking £6000 pension at BRT will leave you with just £4800. If you know next year you wont be a tax payer even when taking the state pension then for sure it will be an option.

patanne wrote: »

Whoops - I should never do these things when tired. £135.30 agreed.

Ah ok ... was hoping you had not done your calculations on 20% or you might have been in for a nasty shock!!

patanne wrote: »

Still a good deal though.

Again it always depends on circumstances etc but if the basic argument is that it takes 13, 14, 15 years to get to break even, then personally I don't think its a worthwhile deal. I still have to make sure I don't pop my clogs before the break even year AND I have to hang about for a reasonable few years afterwards to make any decidable difference.

patanne wrote: »

I still haven't taken my admitted small private pension though as the year I was going to take it it fell through the floor AND they changed the annuity rates, which between the two took a good third off it.

Good for you. You got lots more options now with that so good choice there for sure.