deferring state pension?

johnaka

not trying to be clever ,just need a little more info..
in another post by jamesd..
Did you know that from state pension age a person can defer their state pension and that it will be increased by 10.4% for each year it's deferred? That's way more than any possible mortgage interest saving and it lasts for life. It's also inheritable by a spouse, most of it. Your wife can get this deal. You can't, because you reach state pension after state pension age you're on a lower 5.8% not inheritable deal if you defer.
please can you explain this..
if I were to defer my s/pension by 1 year just to gain an extra £613.10 a year,it would take roughly 9 years to get back £5881.20.which I could have claimed and saved if not needed.
according to the gov-web it stated that any extra state pension counts as extra income and taxable.
this seems to me will wipe out any gains you have made by deferring.if I read it right.
I'm due to retire in nov 2016 but intend to carry on working part time as I do now(self employed).
I've thought about deferring but something tells me don't.
I've just got that niggling feeling that the gov are not giving anything away for nothing.
it'll be much appreciated if you can clear this up for me please.john

atush

it doesn't matter so much for you.

That is the current rate, for those retiring now and up to Apr next year. By the time you retire, it drops to 5.8% (I think, could be less).

You'd pay income tax on the extra only if you earned over your PA. it would increase your break even point, but a 65 yr old of normal good health should live long enough to benefit.

mgdavid

atush wrote: »

...... but a 65 yr old of normal good health should live long enough to benefit.

Isn't it the case that the average 65 yr old is likely to live more than twice as long as needed to break even, male LE at 65 is about 88 IIRC. What I call 'double or quit'.

bowlhead99

Basically if you choose to defer (not take) your pension until later you have a choice. Get paid what you have given up, with a bit on top, as a lump sum. Or get an increased pension for life.

On the current scheme the extra you 'earn' is 0.2% a week, or 10.4% for a full year of deferring. You are right it takes time to catch up to where you were. But they keep on paying that high rate for the rest of your life. Give up for 1 or 2 or 3 years when you are in your mid 60s, and you will be getting 10 or 20 or 30% more every year, inflation linked, in your 70s, 80s, 90s, 100s.

As mentioned on that thread it is a giveaway, on the current scheme although of course it takes a while to pay you back.If you can do without the cash it's a great insurance policy against living a long time.

You say they wouldn't give away for nothing ... true - it is precisely because they can't give away too much that they are revising it for new retirees which is why jamesd made the point about positions where a one spouse might retire at a time when they are lucky enough to be able to use the current version of this arrangement but a husband might not. In your case looks like you reach state pension age a bit too late but if you have an 'other half' that you're married to, who retires earlier, you might at least get one of you on the sweet deal.

johnaka

my wife is 7 years younger than me.
so it won't be so sweet.
just sent off for a pension forecast so we'll see what they have to offer.
my last one was £122.87 in 2008.
state £90.70
add state £28.99
graduated £3.18
going by above hopefully I wont be far off the £148 mark.
even though I opted out for a few years.

tangleteeth

There's something else to consider when deciding to defer your State pension.

5 years ago my wife deferred hers for 12 months when she retired aged 60 - this gave her about an extra £600 per year which is useful extra money, and this appears on her annual increase letter as "Deferred - Extra Basic Pension".

For the first time this year I calculated that the increase in this deferred basic pension was 1.2%.

How is this ?
I thought that basic state pension was "triple-locked" being the highest of wage inflation, retail inflation, and 2.5%.
Certainly the main part of her basic state pension increased by 2.5%.

Can anyone point me at information that explains this sub-standard increase on deferred basic state pension ?

KathysBoy

tangleteeth wrote: »

There's something else to consider when deciding to defer your State pension.

5 years ago my wife deferred hers for 12 months when she retired aged 60 - this gave her about an extra £600 per year which is useful extra money, and this appears on her annual increase letter as "Deferred - Extra Basic Pension".

For the first time this year I calculated that the increase in this deferred basic pension was 1.2%.

How is this ?
I thought that basic state pension was "triple-locked" being the highest of wage inflation, retail inflation, and 2.5%.
Certainly the main part of her basic state pension increased by 2.5%.

Can anyone point me at information that explains this sub-standard increase on deferred basic state pension ?

The triple lock only applies to the Basic State Pension. Additional State Pension which includes Deferred are increased in line with prices inflation, which is normally CPI (and is the rate you received).

Its set out in the Social Security Administration Act 1992.

tangleteeth

My wife also gets Additional Pension but this is reduced by Contracted Out Deductions (COD) and there is also an elemnt of Deferred Additional Pension.
Surely basic pension that has been deferred should be increased in line with un-deferred basic pension.
I've scanned the 1992 Act and can't find any meaningful reference.

mgdavid

tangleteeth wrote: »

........
Surely basic pension that has been deferred should be increased in line with un-deferred basic pension........

No; the triple lock is targeted at the most needy, i.e. people with just the basic SP, not people who have additional SP or can afford to defer.

tangleteeth

mgdavid wrote: »

No; the triple lock is targeted at the most needy, i.e. people with just the basic SP, not people who have additional SP or can afford to defer.

My wife couldn't afford not to defer because her basic pension was going to be less than standard due to paying married women's stamps in earlier years (that's yet another mis-sold pension scandal). She chose to work an extra year before taking her pension. Anyone can do this - even the most needy.

It would be useful if someone could point me at an official source written in plain English.

johnaka

so it seems that by deferring is not a such a good idea for the likes of me retiring after April.
to my calculation it will take roughly 9 years to get it all back plus a pitiful returns (yearly pension increase)
it doesn't appear to be worth it.
unless I'm missing something.
personally I don't expect to live a good long life due to my years in a industrial type working environment,welding/fabrications 40 years of it.
1 kidney removed through cancer.no body in my family have lived beyond 73 years.