New State Pension Guide

Tom99

ChrisEd wrote: »

NI years are April to April and you only get credited for full years.
If you are due to retire part way through a Tax year and are not due to get full State Pension is it worth delaying retiring by a few months so the final year is credited to your state pension?

You don't pay NI after you reach state retirement age so that would not help you.

nigelbb

Tom99 wrote: »

You don't pay NI after you reach state retirement age so that would not help you.

Which is often an unexpected bonus if you continue to work & discover that tax on your earnings goes down from 32% to 20% (42% -> 40% for higher rate).

That jump from 20% to 40% for higher rate becomes a big incentive to invest as much as possible into a pension. It's also remarkable what an incentive there is to put as much money into your pension as possible when you can count the years to drawing it in single digits:-)

GibbsRule_No3

nigelbb wrote: »

Which is often an unexpected bonus if you continue to work & discover that tax on your earnings goes down from 32% to 20% (42% -> 40% for higher rate).

That jump from 20% to 40% for higher rate becomes a big incentive to invest as much as possible into a pension. It's also remarkable what an incentive there is to put as much money into your pension as possible when you can count the years to drawing it in single digits:-)

I will be in this boat, already working this year before SP starts in March 2020 so no benefit for these 11 months to my contracted out part.(yes, I know I'm lucky! before anyone says) Is there somewhere I can work out how much extra, if it is possible, to put into the current Stakeholder pension that I am paying in to now, after I start taking my State Pension? I am about to start my 49th year with my company and might decide to stay and get to 50 years. From the amount the Stakeholder pension has been increasing since I started it 4 years ago, I'm assuming it would be a better return to pay more into it, rather than open a savings account for the State Pension? I will take the Stakeholder as a lump sum when I finally retire. I do have an appointment with Lighthouse, Prospect Unions representative in a couple of weeks and wonder what to ask him regarding this, so any advice is welcome.

nigelbb

GibbsRule_No3 wrote: »

I will be in this boat, already working this year before SP starts in March 2020 so no benefit for these 11 months to my contracted out part.(yes, I know I'm lucky! before anyone says) Is there somewhere I can work out how much extra, if it is possible, to put into the current Stakeholder pension that I am paying in to now, after I start taking my State Pension? I am about to start my 49th year with my company and might decide to stay and get to 50 years. From the amount the Stakeholder pension has been increasing since I started it 4 years ago, I'm assuming it would be a better return to pay more into it, rather than open a savings account for the State Pension? I will take the Stakeholder as a lump sum when I finally retire. I do have an appointment with Lighthouse, Prospect Unions representative in a couple of weeks and wonder what to ask him regarding this, so any advice is welcome.

You can continue paying in to a pension until you are 75. Each year you can pay in the lower of your total salary or £40K.

As you can take 25% as a tax free lump sum then the tax rate on the pension when it is paid out is only 15% if you are a standard rate taxpayer giving a saving of £50 for every £1K you put in your pension. It's even better if you are a higher rate taxpayer if your pension income will be below the higher rate threshold as then your tax saving is a massive £250 on every £1K you put in your pension.

GibbsRule_No3

nigelbb wrote: »

You can continue paying in to a pension until you are 75. Each year you can pay in the lower of your total salary or £40K.

As you can take 25% as a tax free lump sum then the tax rate on the pension when it is paid out is only 15% if you are a standard rate taxpayer giving a saving of £50 for every £1K you put in your pension.

Sorry for being dense, does this mean I can ask to put my monthly take home pay of say £1100 into the Stake Holder Pension? Or do I have to take some wages? I would not need it, because I have two pensions already in payment and then the SP every month. The three would come to more than my tax free allowance of £11500 (or whatever it is now). So I would still pay tax, if that is an issue. I am already maxing the amount the company match, so I'm assuming it will just be the tax benefit of putting all the wages in. I probably only want to do it for a year to 18 months.

nigelbb

GibbsRule_No3 wrote: »

Sorry for being dense, does this mean I can ask to put my monthly take home pay of say £1100 into the Stake Holder Pension? Or do I have to take some wages?

No need to take any wages. You can pay the whole of your salary into your pension provided it's not more than £40K/year. If you did want to access some of the money immediately you can take up to £7.5K as the 25% TFLS then pay tax on the remainder as you draw it..

badmemory

You could also defer your state pension. This increases the SP by 1% for every 9 weeks or 5.8% for a year.

Broseley

I retired from teaching aged 59 and started drawing my work pension in 2018. However I will be about 6 years short for my 35 years to get the full new state pension. My forecast says that I'll get £143/week. I am considering topping up. But is it worth it? £780 for one year will get me an extra £4.82/week. Presumably this will increase if I top up further years, but how long would it take to get my money back if I topped up 6 years?
If I died before then would my husband get the money? (He is still 17 years off retirement age)
Would I be better off investing the money elsewhere?

BoxerfanUK

Broseley wrote: »

I retired from teaching aged 59 and started drawing my work pension in 2018. However I will be about 6 years short for my 35 years to get the full new state pension. My forecast says that I'll get £143/week. I am considering topping up. But is it worth it? £780 for one year will get me an extra £4.82/week. Presumably this will increase if I top up further years, but how long would it take to get my money back if I topped up 6 years?
If I died before then would my husband get the money? (He is still 17 years off retirement age)
Would I be better off investing the money elsewhere?

It would take you 3.11 years to get your money back so worth it in my opinion, although consider if you have other pension income your state pension may be taxable and in that case it would take up to 3.89 years to get your money back if a 20% taxpayer. I don't believe your husband would get any of that back if you were to die before then.

molerat

Broseley wrote: »

I retired from teaching aged 59 and started drawing my work pension in 2018. However I will be about 6 years short for my 35 years to get the full new state pension. My forecast says that I'll get £143/week. I am considering topping up. But is it worth it? £780 for one year will get me an extra £4.82/week. Presumably this will increase if I top up further years, but how long would it take to get my money back if I topped up 6 years?
If I died before then would my husband get the money? (He is still 17 years off retirement age)
Would I be better off investing the money elsewhere?

Topping up is considered good value, generally better than most available on the open market. Each £780 will give you £4.82 per week, increasing with the triple lock, for the rest of your life so a simple £780 / 4.82 = 162 weeks to get your money back ignoring any tax implications. Under the post 2016 scheme the only pension that can be inherited is any protected payment that is over and above the new maximum amount. But ........ 35 years is not relevant to you as you are on a hybrid scheme. I assume your forecast states you currently have £143, there is likely 2 or 3 figures on that forecast, and care may be needed in deciding what will make a difference.