State Pension Deferral

mgdavid

for the calculators it's 10.4% not 10% increase per annum. May seem small but it soon mounts up if deferring for a number of years.

patanne

I'm just hoping that before I go totally gaga that they change the rules re the K tax code so it is worthwhile taking my private pension & I no longer have to file self assessment. Or my private pension goes up by an quite a big leap! Or they start taxing the state pension at source.

saver861

mgdavid wrote: »

for the calculators it's 10.4% not 10% increase per annum. May seem small but it soon mounts up if deferring for a number of years.

Every little helps.... the extra 0.4% would knock a year or so off getting to the break even point. Still not enough to make me change my mind tho

saver861

patanne wrote: »

I'm just hoping that before I go totally gaga

Looks like I beat you to it then ...... ah well ....

patanne wrote: »

that they change the rules re the K tax code so it is worthwhile taking my private pension & I no longer have to file self assessment. Or my private pension goes up by an quite a big leap! Or they start taxing the state pension at source.

Well you could go down and bang on the door of number 10 ... tell him whats what an all ....

patanne

Yes already tried HMRC after a website I was on suggested it might be a possibility, local MP who only seems interested in making the local council pay more to empty bins that unless you have babies is just an expensive exercise. You are right it does only leave me with number 10 or possibly number 11. I think I will try number 11 after the election. Total waste of time now they are all too busy saying how bad it will be if the other party (regardless of which one) gets in.

greenglide

Or they start taxing the state pension at source.

To tax State Pension at source would be a huge undertaking so I don't envision it being done in anything but the distant future.

Since the State Pension entitlement is always known to HMRC for each recipient there is less point in deducting tax at source anyway as State Pension generally has the first bite of the cherry and any remaining allowance is given to other income.

It is generally only when the State Pension exceeds the personal allowance that issues arise and that is a small percentage of people and will fall as AP from GRAD / SERPS / S2P disappears as nSP becomes the norm.

bouicca21

The government's leaflet on deferral
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/372517/dwp024-102014.pdf
(See page 13)
Gives a useful calculation. It's pretty rough as it doesn't take into account any increase in pension, nevertheless it basically suggests that it takes ten years to break even for someone taking the increased pension. Whereas one could have a substantial lump sum to invest/spend instead. This certainly seems attractive to me, not sure why it is being suggested that the lump sum option is not a good deal.

mgdavid

IMO lump sum from deferral only seems good if:
- you don't have any other lump sum / savings / investments
- you want or need a lump sum to pay down debt, house repairs, blow it on a holiday / car etc
- you don't intend or think you will live another 10 years
- you don't need the increased SP for living expenses

Lump sums are too easily frittered; an increased SP is for life.

greenglide

an increased SP is for life.

and, crucially, can be inherited by a spouse.

A couple who both receive nSP (so SPa after 5/4/2016) cannot inherit such increments, cannot get a lump sum on deferral and get onle half the reward for deferral.

atush

bouicca21 wrote: »

The government's leaflet on deferral
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/372517/dwp024-102014.pdf
(See page 13)
Gives a useful calculation. It's pretty rough as it doesn't take into account any increase in pension, nevertheless it basically suggests that it takes ten years to break even for someone taking the increased pension. Whereas one could have a substantial lump sum to invest/spend instead. This certainly seems attractive to me, not sure why it is being suggested that the lump sum option is not a good deal.

Basically, if you wanted a lump sum to invest, you would have been better off not deferring you pension, but taking the income and investing it in a DC pension while you were still working. Would have given you 40% TR, plus you would have been investing it over the last 6 years and it would then be 25% TF (instead of taxed at your current 40%) and you could take the rest after you retire and are paying only BRT.