State Pension deferral - incorrect result ?

jamesd

John_Pierpoint wrote: »

[I am still not clear as to the different rates of "inflation" proofing applying to the different elements of a state pension]

The increase from deferring is added to the Additional State Pension portion. All of the ASP portion including this increases at CPI. The Basic State Pension portion has the triple lock.

John_Pierpoint wrote: »

As a bloke, I think my "kick the bucket" target is age 84

Only if you have some medical condition that causes you to have lowered life expectancy. ONS 2010-based cohort life expectancy for UK males who have attained the age of 70 in 2016 is 17.6 more years, taking them to 86.6 years old.

If using significant amounts of drawdown a longer deferring period can help you to draw more money out of the drawdown portion by reducing the chance of going below a minimum income target. This includes going beyond the break-even deferring age, because it's being used as longevity insurance as well as reducing overall income volatility. You might experiment with the cfiresim tool I described here but also experiment with state pension starting later but at a higher post-deferral level to see the effect of each additional year of deferral.

jamesd

John_Pierpoint wrote: »

The computer has worked out that I have deferred for 231 weeks. [Sounds about right]
Had I claimed in 2011 I would have got £109.97 per week.
This has now grown to £124.70 due to the annual up-rating.

Due to deferment I can also claim £26,679.10 as a taxable lump sum or
get an extra £50.81 added onto the weekly pension.

Clever mathematicians out there does that sound right ?

231 / 52 * 10.4% = 46.2% increase. 0.462 * £124.70 = £57.61.

So no, it doesn't appear to be right but it does at least explain where the £124.70 in your original post came from.

John_Pierpoint wrote: »

Had I claimed in 2011 I would have got £109.97 per week. This has now grown to £124.70 due to the annual up-rating.

0.462 * £109.97 [STRIKE]£124.70[/STRIKE] = £50.806 so that's where the 50.81 comes from.

But I think that the increase from deferring is based on the inflation-adjusted amount, not the pre-inflation amount, so I think that you still have been given a wrong answer and the correct one is £57.61 increase.

At this point at least we do know where all of the numbers come from so all you need now is confirmation that it's an increase of 46.2% on the post-inflation £124.70 that'll be £57.61 and you're done with all in agreement.

brewerdave

jamesd wrote: »

0.462 * £124.70 = £50.806 so that's where the 50.81 comes from.


At this point at least we do know where all of the numbers come from so all you need now is confirmation that it's an increase of 46.2% on the post-inflation £124.70 that'll be £57.61 and you're done with all in agreement.

Eh ?? Don't think you meant that calculation! but 0.462* £109.97 = £50.81
So the Q still is :- 46.2% increase on the initial or the latest SP figure ??

Alter_ego

brewerdave wrote: »

So the Q still is :- 46.2% increase on the initial or the latest SP figure ??

Well, all the examples in the leaflet use initial SP to work out what you get, with no mention of increases in later years. Is that dumbing down of the leaflet?
The Q is pertinent for me also. I deferred in 2014 and need to decide when to reclaim. If the latest SP amount is used it will make sense to reclaim just after the annual rise.
I asked DWP on phone and got a non committal answer. If anyone actually discovers the correct answer please post it here. Thanks AE

jamesd

brewerdave wrote: »

Eh ?? Don't think you meant that calculation! but 0.462* £109.97 = £50.81

Thanks, I typed 124.70 when I should have typed 109.97 but used the right 109.97 in the calculation.

brewerdave wrote: »

So the Q still is :- 46.2% increase on the initial or the latest SP figure ??

Deferring your state pension leaflet, example on page 12:

"Ann reached State Pension age in 2011 and decided to put off claiming her State Pension. She starts claiming it from May 2013. On the date she claims, her weekly State Pension (before we add any extra State Pension) is £120. Ann has put off claiming for 100 weeks. This means she is entitled to an extra £24 a week on top of her £120. We have worked this out as follows.

For every five weeks she put off claiming, we pay Ann 1% of the weekly pension she would have been receiving during that time. To work out Ann’s extra State Pension for each year she put off claiming, we divide this 1% figure by five. In Ann’s case this is:

£120 divided by 500 = £0.24 (500 is 1% of Ann’s State Pension for every five weeks she put off claiming).

£0.24 x 100 (the number of weeks Ann put off claiming) = £24

Ann will get a total State Pension of £144 a week when she claims. This is made up of her £120 a week State Pension plus her £24 a week extra State Pension."

It's the date of the post-deferral claim, which has had all of the inflation and triple lock increases applied to it.

jamesd

And an extra special bonus for those outside the UK, this from page 39:

"If you normally live outside the UK and you have not already claimed your State Pension, you can put off claiming when you reach State Pension age.

When you finally do claim, we will work out how much pension you may get based on the amount you would have got if you had been claiming it at the time. This will include any yearly increases to the State Pension, even if you are living in a country where these increases don’t normally apply."

LXdaddy

Alter_ego wrote: »

Well, all the examples in the leaflet use initial SP to work out what you get, with no mention of increases in later years. Is that dumbing down of the leaflet?
The Q is pertinent for me also. I deferred in 2014 and need to decide when to reclaim. If the latest SP amount is used it will make sense to reclaim just after the annual rise.
I asked DWP on phone and got a non committal answer. If anyone actually discovers the correct answer please post it here. Thanks AE

We have had a long thread about this very subject. The Extra Pension (ie the 10.4% per year or 1% per 5 weeks or 0.2% per week) is based on the pension as at the date you start payment. The "Ann" example in the booklet specifically states that.


If you are about to put your deferred pension into payment in the next few weeks then YES it is worth waiting until after April 5th so that your calculation is based on the increased Basic SP.

jamesd

John_Pierpoint wrote: »

I think I will try to align the initial pension payment with the new tax year.

A good plan because of the way the uprating works, ensure that you do it after the new year has started.

uk1

jamesd wrote: »

A good plan because of the way the uprating works, ensure that you do it after the new year has started.

Just to inject a touch of confusion here, as you know I started a thread about that hot spot and the issue seemed clear to me but not so others.

I asked the pension advisory service that specific question and this is my question and their reply.

[FONT=&quot]Thank you for your recent enquiry in which you wrote:[/FONT]

[FONT=&quot]“[/FONT][FONT=&quot]A general question about deferring state pension. I have already deferred and I am choosing the date when I will choose to take my pension. Am I right in saying (for example) that it is better to take my pension on or shortly after 6th April 2016 rather than shortly before because I would then benefit from the triple lock increase due each year on that date? In fact this date is a sort of "hot spot" when choosing?”[/FONT]

[FONT=&quot]An interesting point. I have tested a few examples and it makes no difference whether you take the deferred pension before April and the ‘Triple Lock’ increase or after. For fairness my testing was done assuming the same deferral period i.e. 100 weeks.[/FONT]

[FONT=&quot]Having said that, for each additional 5 week period you defer claiming your pension the pension will be increased by a further 1%. So if you compare taking the pension at the beginning of March with taking it in the 2nd week of April there will be a 1% difference in uplift because you will have deferred for a further 5 weeks.[/FONT]

[FONT=&quot]I trust that this information will prove helpful. If you require any further information feel free to call our helpline on 0300 123 1047 which is available from 09:00 to 17:00 Monday to Friday.[/FONT]

[FONT=&quot]Kind regards[/FONT]
XXXXXXX XXXXXXXXXX
[FONT=&quot]Technical Specialist[/FONT][FONT=&quot]
[/FONT]

Jeff

LXdaddy

uk1 wrote: »

Just to inject a touch of confusion here, as you know I started a thread about that hot spot and the issue seemed clear to me but not so others.

I asked the pension advisory service that specific question and this is my question and their reply.

Jeff

Interesting. UK1, jamesd and LXdaddy were all involved in that earlier thread. If this response from pension advisory service is correct then we have an error. But I suspect this Technical Specialist has not fully understood the implications of CPI being lower than the Triple Lock number.