State Pension Deferral

AL_in_Surrey

Hi Forum Participants . Please help me solve this puzzle.
I have just reached state pension and was considering deferring it for a year , but was doing some verification , could some one please confirm my findings?
In the money saving site , they give an example of someone deferring the basic 7k new pensiongetting an increase of 406.00 pounds extra at the end of the year . that meas a £7.80 per week.
My query : If you defer , you will not get the £7.406 lump sum at the end of the year. You will only be able to recoup the money by the £7.80 extra a week from year 2 .( when you start claiming) . which means the 7 K that you defer getting the first year , divided by 7.80 a week from year 2 . . will take you 17 years to break even ?
7000 divided by 7.80 = 897 weeks divided by 52( weeks in a year) =17 years? Am I right? .
So If i'm 65 now , I will be 82 before I start reaping the rewards after deferring ?
Please tell me I'm wrong . Many thanks for reading this message . ::

maximumgardener

You have nailed it, Al

not worth doing in many situations........

except perhaps for a limited time if you are using deferral combined say with tax free cash to keep you below the £11000 personal allowance etc to manage the actual tax you have to pay.
Zero is good and legit!

LXdaddy

AL_in_Surrey wrote: »

Hi Forum Participants . Please help me solve this puzzle.
I have just reached state pension and was considering deferring it for a year , but was doing some verification , could some one please confirm my findings?
In the money saving site , they give an example of someone deferring the basic 7k new pensiongetting an increase of 406.00 pounds extra at the end of the year . that meas a £7.80 per week.
My query : If you defer , you will not get the £7.406 lump sum at the end of the year. You will only be able to recoup the money by the £7.80 extra a week from year 2 .( when you start claiming) . which means the 7 K that you defer getting the first year , divided by 7.80 a week from year 2 . . will take you 17 years to break even ?
7000 divided by 7.80 = 897 weeks divided by 52( weeks in a year) =17 years? Am I right? .
So If i'm 65 now , I will be 82 before I start reaping the rewards after deferring ?
Please tell me I'm wrong . Many thanks for reading this message . ::

You say you have just reached state pension age. Exactly when did your reach State Pension Age?


If it was BEFORE 6-April-2016 the deferral is MUCH more advantageous. Prior to that date we get 1% increase every 5 weeks of deferral where as from that date onwards the increase is 1% every 9 weeks.


So the benefit has reduced very significantly. Under the old system the increase was worth 10.4% per year and therefore took about 10 years of payments to get pay out more than you would have by not deferring. Now it is 5.8% per year and takes about 17 years to pay back.


Obviously our chancellor recognised what a good deal it was and made it less attractive because it was costing too much

greenglide

But it is indexed linked. Where else can you get 5.8% indexed linked without any investment risk? Compare it to the price of indexed linked annuities.

But it is no longer inheritable which is a significant downside these days.

badmemory

If deferring it still seems to be a much better deal to take the weekly increase that the lump sum. Just as long as you have no health issues.

greenglide

If deferring it still seems to be a much better deal to take the weekly increase that the lump sum.

Anyone who reaches SPa from 6/4/2016 onwards (i.e. those that get nSP) don't get the option of the lump sum.

Since the increments are no longer inheritable and the rewards are less the lump sum option may have looked more attractive.

AL_in_Surrey

Thank you ..
As I thought ;-)

AL_in_Surrey

Thank you ..
As I thought ;-)


I reached 65 on 07 april , therefore the new rules apply . thank you everyone who read and replied.


AL