Pension top up scheme from 12/110/15

warwicktiger

Talk about mortgaging the future:

http://www.aol.co.uk/news/2015/10/11/state-pension-topup-scheme-to-be-launched/

kidmugsy

What do you mean?

jamesd

The price is set to be actuarially neutral for the government/us.

In general those who are eligible should not use it because they can get a higher 10.4% on their money by deferring their state pension for a year instead, something they can do once even if they have already claimed it. It's not limited to just one year, you can defer for five years and get a 52% increase.

Exceptions where class 3A might be a better deal include:

1. those over 80 (but annuities might be a better deal at that age, check).
2. planning to defer for more than five years already, and of an age where the break-even cash flow shifts the best choice from deferring longer to class 3A.
3. older partner with younger spouse who can inherit 50% or more of the increase, sometimes 100%.
4. Those who are already doing maximum practical deferring and who can benefit from the actuarial assumptions because their life expectancy is longer than average. For example, it's on average a better deal for women or English people on average than for men or Scottish people because of differences in life expectancy between genders and regions.

xylophone

older partner with younger souse

Brahms and Liszt?

kidmugsy

jamesd wrote: »

In general those who are eligible should not use it because they can get a higher ...

You keep saying this, jamesd, but it's simply illogical. It makes sense only if the alternatives are mutually exclusive. They aren't: you can do both if you want to and can afford it. You might as well have told someone not to open a Santander 123 account, paying 3% p.a., because they could have got a higher 4% p.a. on the government's Codgerbonds. But for many people it would have made sense to open both.

jamesd

And what of the rest of my post that you didn't choose to quote, that gave a range of cases where using it could make sense?

In general it's best not to use it but that still doesn't eliminate the cases where it's useful, nor has it prevented me from telling people that it looks like a good idea for them when that's true. You might have missed it but I've done that a couple of times so far in the last week, one of them saying do both.

adnanmanzoor

seems more useful for people who missed the boat and are offered second opportunity. If one goes into cost vs benefit, issues may emerge but for me starting out and catching up is more important.

[Deleted User]

I am going for it. I am very healthy and the money is better available for me if I want it. I could leave it to my descendants but they would have to pay tax anyway. No contest really, I have already arranged for an index linked bond to be cashed in slightly early and will add to it from savings . A bit like an annuity for me tbh

jamesd

kittie wrote: »

I am going for it. I am very healthy and the money is better available for me if I want it. I could leave it to my descendants but they would have to pay tax anyway. No contest really, I have already arranged for an index linked bond to be cashed in slightly early and will add to it from savings . A bit like an annuity for me tbh

Yes. it can be a great deal. A few questions to determine this, though:

1. Have you already deferred as much as sensible, or are you already planning to do so? Or are you unable to defer because you have already both claimed your state pension and deferred once then stopped deferring? Because this starts out paying 10.4% it's usually a better deal at the start than buying class 3A, with adding some class 3A buying starting to become a good deal as the total time deferred increases.

2. Are you over age 80? After this age buying class 3A tends to beat deferring.

3. Is your health good? Either lowered life expectancy or age or the two combined can cause an annuity to pay more than Class 3A for the same cost. It's particularly important for those over 75 in less than great health or those over 80 to compare to an annuity in case an annuity pays more for the money.

Tea_Hee_23

Safer to keep it under your mattress

[Deleted User]

jamesd wrote: »

Yes. it can be a great deal. A few questions to determine this, though:
.

Ah James. yes good questions for the uninformed.