New State Pension Guide

badmemory

Also if deferred, taking it as a lump sum is not always a good idea. I deferred & if I had taken it as a lump sum it would be seriously diminished by now. Whilst I am somewhat diminished I am not that seriously diminished.

Straightbat

Dazed and c... I am struggling with the reply buttons because I keep getting somebody else's post quoted when I'm trying to reply to you.

You yourself as well as Xylophone explained and quoted links to demonstrate that deferred backdated payments for the new state pension are taxed in the year when they would have been due rather than in the year when they are paid (unless it happens to be the same year).

Yes I am talking about the new state pension (I referred to backdated payments rather than a "lump sum" - though they are paid as such).

Dazed_and_confused

I think you are getting confused.

Deferment means you have the choice* of either taking a one off lump sum of the pension you have deferred or a permanent increase in your weekly/4 weekly payments based on the length of time you have deferred.

A deferment lump sum is taxed in the year you get the payment and is taxed under special rules, it isn't treated like normal income.

An increased weekly/4 weekly payment is taxed under the normal rules for State Pension payments, effectively when the payment is received.

*the deferrment lump sum option has been abolished for those reaching State Pension age after 5 April 2016.

Backdated pension payments are where you have put off claiming your State Pension and when you come to claim it you ask for payment of (upto) the last 12 months to be paid in a lump sum. This would be taxed in the tax year the payment relates to, not when it is paid.

Maybe it would help if you told us when you reached State Pension age?

Dazed_and_confused

Have just seen on a much earlier post that your SPa was post April 2016 so as I understand it you don't have a choice when deferring, it is increased weekly/4 weekly payments which are the only thing available to you.

And those payments would be taxable when they are made.

NB. I presume (don't know for certain) that as you have deferred your State Pension this means you have "claimed" it and the option of backdating it is no longer available. Not that there would be much sense in deferring and backdating as that would defeat the object of deferring

Straightbat

Dazed and c(onfused?)...State pension age Feb 2018. With respect I don't think it is me who is getting confused! Deferred payments (not payment) under the NSP are taxed as though they had been paid in the tax year when they were first payable, according to links posted by you and xylophone, not necessarily therefore in the tax year when they are actually received. For the avoidance of doubt I added "backdated" and confirmed I was talking about the NSP ("backdated deferred payments").

Dazed_and_confused

If you are referring to posts in this thread then the previous questions were from someone who was asking about tax treatment of a backdated payment, not the deferred element.

A backdated payment will be taxed in the year it relates to not the year it is actually paid.

A deferred State Pension will be taxed in the year it is paid.

I'm not even certain you can even have a "backdated deferred payment" but if you can then the backdated element is not going to be a lump sum in the normal sense of the "State Pension Lump Sum" (which has special rules when it comes to being taxed).

Straightbat

A payment is deferred if it is not drawn when it is first due. A pension is deferred if it is not drawn when it is first due. A deferred pension can be backdated by up to a year (you could argue it then ceases to be deferred, if doing so takes you back to your earliest pension start date - but the payments still would have been)! In that case, the deferred and backdated payments would be paid as a lump sum...ta da!

There is no question that the current payments of a previously deferred pension being paid at their earliest possible due date would be currently taxable. The discussion is about backdated ones (if backdating is requested) which are received as a lump sum because they had been deferred!

(Note: above generally with reference to the new state pension.)

Dazed_and_confused

"Deferment" of State Pension is not deferment in the normal sense, it has special rules.

I think what you seem to be saying is you expect DWP to let you "defer" your State Pension. For simplicity let's say your pension was £100. And you deferred it for a year. At which point it will have increased in value by 5.8% to £105.80.

Then you ask DWP for it to be put into payment.

And ask them to backdate the payments for a year.

And expect them to pay you at £105.80/week for the backdated element.

Can you show us where DWP say that is possible?

As I understand it after the year has passed you will have a choice of £100/week backdated for a year and paid in a lump sum and £100/week thereafter.

Or £105.80/week paid from now on for ever.

NB. Obviously inflation increases would still be applied.

Straightbat

Dazed and c...

1. It is permissible to defer the new state pension, there is no "defer" about it. In fact you can even defer it a second time after you've started drawing it if you want to.

2. I agree with your analysis re £100/£105.80.

Dazed_and_confused

I know you can defer it. People who choose to defer it do so to get a fairly generous increase in their weekly/4 weekly payment.

Previously they did it to get a very generous increase in their weekly/4 weekly payment or a deferred State Pension lump sum. Which if you plan/time things correctly would be subject to a lower tax rate than would otherwise be the case.

I still think you are getting confused between State Pension deferral, which is a very specific choice an individual has to make, and backdating a claim.