defered pension for sole trader

wyngate

Hi,
I am a sole trader (self employed and run a guest house) and my birthday is 28/12/1952 so I reached state retirement in September 2015 and have not claimed my state pension yet.
My question is how long should I defer it? I am in good health though creaking at the knees! Might be able to continue working for another 5 years or so, and do not have any private pension to rely on. Any suggestions?
Thanks

kidmugsy

jamesd, the deferral enthusiast, would probably suggest that five years might be about right. Do you have a spouse to inherit the extra pension when you shuffle off? Is your family particularly short-lived?

Do you have an estimate of your state pension as of Sept 2015? How many years of deferral would it take for the State Pension to grow to fill the Personal Allowance against income tax? 16/17 £11,000. 17/18 £11,500, govt target (by the next election, presumably) £12500.

wyngate

Hi,
I have a husband who has to wait until Jan 2020 for his state pension but has already taken early retirement with his private pension. I have worked all my life so have full entitlement to state pension. As for longevity in my family, hard to say.... my dad died at 58 yrs but my mother lived to 91 yrs... so roll the dice!!

kidmugsy

In your case it probably is worth deferring for five years then. Just check how your original pension plus extra pension will compare with the Personal Allowance. If you really can defer a pension on which you would otherwise pay 20% tax, to generate an extra pension on which you will pay no tax, then you are making a pretty wonderful investment.

What do you plan to do with the guest house business when you retire?

wyngate

Thanks for your answer.
As to what I do with my guest house (which is also our home) is hard to say! We either sell it as a home or guest house and downsize or we rent it out and rent somewhere smaller and use the difference in rent to live off!

kidmugsy

wyngate wrote: »

or we rent it out and rent somewhere smaller and use the difference in rent to live off!

Paying tax on the rent received and getting no tax relief on the rent paid: it shows what a bargain owner-occupation is in terms of tax avoided.