State Pension deferral - incorrect result ?

uk1

LXdaddy wrote: »

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.

Who on earth can you trust to provide an accurate answer of what seems like a straightforward clear but important question if not The Pension Advisory service?

greenglide

uk1 wrote: »

Who on earth can you trust to provide an accurate answer of what seems like a straightforward clear but important question if not The Pension Advisory service?

My reading of their response I that they might well have just used the triple lock for all of the calculation (assume basic only or not realised AP is uprated by CPI).

I wouldn't necessarily expect PAS to be experts on state pension though.

brewerdave

jamesd wrote: »

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.

...sounds like somebody needs to send this leaflet to the person who calculated the SP entitlement in post #50 :rotfl:

xylophone

The OP states that if he had claimed in 2011 (I'm assuming August 2011), he would have received a State Pension totalling £109.97 a week.

The Basic State Pension 2011-12 was £102.15, indicating that his ASP was £7.82.

It appears that if he claimed in the current tax year
his total pension (before deferment addition) would be £124.70 - this indicates BSP of £115.95 and ASP of £8.75.

The BSP has increased by triple lock and the ASP by CPI for 12-13, 13-14,14-15 and 15-16.

The booklet ("Ann") states that the deferment increase is based on the pension at the date of claim.

If the claim were made based on £124.70, then 0.2% x £124.70 x 231=£57.61.

If the claim will be based on 2016-17, then presumably the £124.70 will be increased to £128.05 ( BSP of £119.30 and unchanged ASP).

This means that there must be an advantage to claiming in the new tax year as opposed to the old?

LXdaddy

xylophone wrote: »

If the claim were made based on £124.70, then 0.2% x £124.70 x 231=£57.61.

If the claim will be based on 2016-17, then presumably the £124.70 will be increased to £128.05 ( BSP of £119.30 and unchanged ASP).

This means that there must be an advantage to claiming in the new tax year as opposed to the old?

Remember that the Extra Pension (£57.61) from taking the pension "before April 6th" will be increased by CPI on 6th April. Unfortunately this particular year the CPI is actually negative so the increase will be zero.

In a year when CPI is higher than the other two parts of the triple lock the payment would be the same other than the additional 0.2% per week increase (which should be weighed against the advantage of having the cash earlier)

In this year it is certainly better to delay into April if you were thinking of drawing your state pension in March.

uk1

Exactly!

Jeff

uk1

LXdaddy wrote: »

Remember that the Extra Pension (£57.61) from taking the pension "before April 6th" will be increased by CPI on 6th April. Unfortunately this particular year the CPI is actually negative so the increase will be zero.

In a year when CPI is higher than the other two parts of the triple lock the payment would be the same other than the additional 0.2% per week increase (which should be weighed against the advantage of having the cash earlier)

In this year it is certainly better to delay into April if you were thinking of drawing your state pension in March.

Just to double cheque my own scaling of the advantage of waiting for this "hot spot", doesn't it mean in the example you responded too that the gain is in fact 2.5% of £57.61 = £1.44 weekly ie £74.89 annualy over the rest of the SP payment period which is then itself increased annualy by CPI?

If so this is a worthwhile delay.

Jeff

David.s_2

I am 71 and I deferred nearly 5 years from 65. I had 43 qualifying years because I spent many years abroad and did not pay Class 2 NI contributions all the time. That is including the 5 or 6 years during education including Uni. I now get just over £200 which seems about right. I didn't take any lump sum which can be taken fully or in part. However, I am still working and paying 40% income tax. Why not defer longer? I might not live long enough or I might be institutionalised and lose the lot. To make back the deferment takes at least 10 years on the old rules, longer of you pay tax and 17.3 years on the new rules from when you take your pension. Add that to a 5 year deferment. Age 87.3 on the system before you gain. They say it's based on life expectancy but it ignores possible health problems.

David.s_2

Apologies, I seem to have been transported to a different topic here. Where are the guide lines for using this site?

LXdaddy

David.s wrote: »

Apologies, I seem to have been transported to a different topic here. Where are the guide lines for using this site?

David. I suspect you wanted to start a new thread rather than post a reply to this thread.


If you back up one level to the list of threads in forum display http://forums.moneysavingexpert.com/forumdisplay.php?f=19
you will see a Blue "New Thread" button - click that and post your question there.