Pension top up scheme from 12/110/15

bigfreddiel

bigfreddiel wrote: »

My wife gets £137/wk that's, £7124/yr

If she deferred for a year she would get 10.4% increase or £14/wk at a cost of £7124, a years worth of state pension.

Now using the calculator at .gov.uk and after entering her dob and using £14 as the amount of class 3A she needs to buy it costs £11,578. So this option is £4,454 more expensive!

Thanks jamesd for pointing this out.

Cheers fj

Yet again I'm replying to my own post because I think I may be wrong so please check out my further thoughts on to defer or by a top up.

To top up it costs £11,578 so a year later you will have received the £14/week i.e. £741. And you will have received your pension of £7124 a total of £7865. Take that away from your top up payment and you have only spent £3713.

Now if you defer for a year you receive no payment for a year and you've effectively 'bought' the £14/week increase for £7124, what you would have received had you not deferred. So your £14/week increase has cost you £7124, some £3411 more than the top up at the end of 1 year!

I can't see a fault with that logic and I think my initial stab at working this out was in fact wrong!

Look forward to some comments please.

Cheers fj

greenglide

Have taken into account that the £10 a week you take from your capital increase by the triple lock each year, and by at least 2.5%?

I hope not because it increases by CPI as it is Additional Pension, not basic. Only the basic pension increases by the triple lock.

bigfreddiel

greenglide wrote: »

I hope not because it increases by CPI as it is Additional Pension, not basic. Only the basic pension increases by the triple lock.

Of course, slipped my mind thanks for reminding me.

fj

kidmugsy

bigfreddiel wrote: »

Look forward to some comments please.

Small point: most of the Extra Pension will presumably get triple-lock, whereas the 3ANIC additional pension gets just CPI protection.

Bigger, for some people: tax. How does income tax affect your calculation?


EDIT: I've had a go at the sums in comment 12 at
https://forums.moneysavingexpert.com/discussion/comment/69343644#Comment_69343644

bigfreddiel

kidmugsy wrote: »

Small point: most of the Extra Pension will presumably get triple-lock, whereas the 3ANIC additional pension gets just CPI protection.

Bigger, for some people: tax. How does income tax affect your calculation?


EDIT: I've had a go at the sums in comment 12 at
https://forums.moneysavingexpert.com/discussion/comment/69343644#Comment_69343644

Well, let's say my wife's total income is below the tax threshold of £10,200.

More to the point was the calculation on how much the class 3A nice cost compared to a year deferment, because I think I calculated it incorrectly in my first attempt. Check through both workings again NDR let me have your comments.

Cheers fj

Teaandscones

Thinking that my mother may be one of those who may benefit from class 3A?
Age 79, excellent health walks several miles every day, family history of longevity, non taxpayer but some savings.

kidmugsy

Teaandscones wrote: »

Thinking that my mother may be one of those who may benefit from class 3A?
Age 79, excellent health walks several miles every day, family history of longevity, non taxpayer but some savings.

Somewhere hereabouts jamesd (I think) suggests that 78 is the crossover age for top-up vs deferral. You'd want to check that an extra £1300 p.a. (say) wouldn't make her a taxpayer, but otherwise it sounds as if it may be a good idea. Would it be worth waiting until March 2017, just in case health status changes?