Claiming State Pension while still working

Just_caring

My husband will be 65 in October and still works full time (self employed) we cant decide if its worth deferring his state pension (someone has said he needs to live till aged 87 to recoup the money if we defer) or take it and save it our selves.
He does not claim any state benefits and is unlikely too in the near future as we have own our home, have savings and both have small personal pensions which we have not taken yet.
I do not work but do not claim any benefits I will not reach state pension aged until 2023.


My feeling is to take it and save it ourselves.


Any advice appreciated. Thanks

xylophone

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/372517/dwp024-102014.pdf

Has he read the above?

Just_caring

I have been reading the above but still confused was hoping for some personal opinions from people on the forum.

Alter_ego

I believe he will only need to live approx 10yrs from the date he reclaims his pension to gain more than he gives up. That is not taking into account future increases in state pension, or any savings he make is income tax while not drawing his pension.
The 10.4% rate presently on offer is hard to beat provided he has normal life expectancy.

HOWMUCH

You can transfer £1060 of your tax allowance to your husband if you don't use all of your tax free allowance

Just_caring

Thank you alter ego, how did you find out or come to that conclusion?


Howmuch, Thanks, yes I have applied online to do this. Every little helps

Alter_ego

Just_caring wrote: »

Thank you alter ego, how did you find out or come to that conclusion?

Calculated it mathematically, assuming 2.5% uplift annually on SP rates. That assumes the government continues the triple lock of course.

Mojisola

Just_caring wrote: »

I do not work but do not claim any benefits I will not reach state pension aged until 2023.

Are you paying to make sure you can get a SP?

saver861

Just_caring wrote: »

My husband will be 65 in October and still works full time (self employed) we cant decide if its worth deferring his state pension (someone has said he needs to live till aged 87 to recoup the money if we defer) or take it and save it our selves. Thanks

It does depend on individual circumstances to work out the benefits in detail. However, reaching 87 to the breakeven point is very unlikely.

Broadly speaking it takes in the region of eleven years from your retirement date to reach a breakeven point. If you factor in other issues such as taking it and saving it, tax issues etc then the breakeven point could be up to twelve or thirteen years.

However, if your husband is intending to carry on working then its likely he will pay tax on all of his pension so deferring might be a good option. There are also some inheritance advantages.

Deferring does depend on life expectancy so clearly he would have to live the additional 11+ years to reach breakeven and whatever number of years he lives after that will be the benefit. My suggestion is usually to work out the benefits of deferring on the best case scenario, i.e. assumption of living long enough to reap the benefits. However, I also suggest working out the losses in the event of the worst case scenario, i.e. death occurs in year two or three after deferring. You then have both sets of options and can decide if its a risk you want to take.

jamesd

Just_caring wrote: »

My husband will be 65 in October and still works full time (self employed) we cant decide if its worth deferring his state pension (someone has said he needs to live till aged 87 to recoup the money if we defer) or take it and save it our selves.

that's not remotely close to being accurate. It's more likely to be around ten years for one year of deferring, slowly increasing as the number of years deferred increases.

Assuming normal good health it's a good idea for men to defer for 1-3 years and women 3-5 at the current 10.4% deal. If there's a desire for higher guaranteed income longer times than those make sense because neither annuities nor sensible drawdown rates come anywhere close to 10.4% inflation-linked and with much of it inheritable by a spouse.

Just_caring wrote: »

My feeling is to take it and save it ourselves.

You've no real chance of matching 10.4% plus inflation for life by investing and none if you stick to savings. Better to defer and if you want to save, save some of the extra income that'll later come from deferring.

At 10.4% this is one of the best saving/investing deals around.

kidmugsy

When he dies you'll inherit most of it: given how much younger you are that makes it a ridiculously good deal. And it sounds as if it'll save you tax too.