To defer, or not to defer?

greenglide

If she gets the maximum flat rate state pension level she'd have an income of £8,000 a year before deferring. That's not a lot to be living on at any age.

She has already achieved SPa so is under the "old rules".

With no private pensions of any kind she may have a significant AP ehich could take her over £8,000 (and may not).

How much is the SP that she has deferred? This is key.

jamesd

Yes, she's under the old rules so I used 10.4% a year for the deferral increase. With no information on the current state pension value I needed some number to illustrate the point and 8k is a reasonable one to use for a woman reaching state pension age around the time she did, assuming things like time not working to raise children.

Zudecke_2

She lives in social housing and unfortunately doesn't own any property . So if she defers after 3 years, she would receive ~£8k p/a? Would she be eligible for housing benefit as well given that that amount wouldn't even cover her rent?

She currently doesn't receive any benefits (aside from social housing, which I assume is some sort of benefit?).

To clarify, based on the dot Gov website, my mum became state pensionable on 6th July 2014 and so has been deferring for 1 year, 8 months, 17 days.

kidmugsy

Zudecke wrote: »

To clarify, based on the dot Gov website, my mum became state pensionable on 6th July 2014 and so has been deferring for 1 year, 8 months, 17 days.

Do you know what size her pension would have been if she had drawn it from 6/7/14?

xylophone

Worth noting, posts so far have assumed that she's a home owner and not receiving benefits. If she would receive means tested benefits it might not be worth deferring unless she defers long enough to get well above benefit level.

See http://www.entitledto.co.uk/help/State-Pension-Guide

"Deferring your state pension will have an effect on the way your entitlement to other benefits is calculated.

If you claim Pension Credit while you are deferring it will be calculated as if you were getting your state pension in full. If you are entitled to Pension Credit you will not build up extra state pension or lump sum for the period you are getting Pension Credit.

If you claim Housing Benefit (but not Pension Credit) while you are deferring the state pension then the amount of pension you are putting off can be taken into account in the calculation of your Housing Benefit.

If you claim tax credits while you are deferring your state pension then the amount of pension you are putting off does not affect the amount payable."

xylophone

To clarify, based on the dot Gov website, my mum became state pensionable on 6th July 2014 and so has been deferring for 1 year, 8 months, 17 days.

OP, did your mother obtain a state pension estimate before she chose to defer?

If she gives up paid work, is her income likely to be below pension credit level? (£155.60 a week in 2016-17).

I take it that your mother is single?

I assume the link below will be updated for April 2016.

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS48_Pension_Credit_fcs.pdf?dtrk=true

Zudecke_2

She tells me £139

Zudecke_2

On 27th May 2014, she received a letter from DWP titled "Putting off claiming your State Pension - your extra State Pension or one-off taxable lump sum payment".

This was received in response to her asking DWP for an indication of how much extra SP she'd be entitled to should she deferred.

It says:
"You told us that you have put off claiming your SP since 6 July 2014 you want a projection to 6 July 2015".

It goes on to detail that her weekly SP entitlement is £139.61.

Then it says:
"The weekly amount of extra SP you may receive if you take your SP from the date you told us is £14.52 per week. This is on top of your weekly SP."

Finally:
"The one off taxable lump sum you may be entitled to receive if you claim your SP from the date you told us is £7333.47 before tax. You can choose to receive this instead of the extra SP. "

kidmugsy

Zudecke wrote: »

It goes on to detail that her weekly SP entitlement is £139.61.

So, about £7300 p.a. Note that the Personal Allowance versus income tax will be £11k for 16/17 and that the govt hopes to raise it to £12,500 in future, presumably meaning before the next general election.

If she continues to defer her pension she avoids paying income tax on it. When she restarts she's got plenty of room in her Personal Allowance to avoid tax on either her Extra Pension or her Lump Sum, as long as she gets the timing right.

So the crucial question is whether she will be entitled to various state "benefits" when her pension is her only income. I know nothing about benefits entitlements.

GunJack

kidmugsy wrote: »

So the crucial question is whether she will be entitled to various state "benefits" when her pension is her only income. I know nothing about benefits entitlements.

isn't there something about housing & council tax benefits if income below the pension credit level? Think the OP should be checking this out for their mum, working too long and deferring SP may be detrimental to her finances...