Longer term deferring

eastcorkram

I've read on here about not claiming state pension for a year or two, and then receiving a higher state pension.
I've discovered only today, that my father in law, has never claimed it. He is now 80. He has been in receipt of an army pension since age of 55 I think. Does that mean he shouldn't get a state pension? Or are they two separate things? He was in forces all his life I think.
If he is entitled to a state pension, I assume it would be greatly increased on the original amount?

ischofie1

It should & it will be greatly increased. He would have the option of taking a lump sum instead of increased pension & this would be a large amount.

greenglide

State Pension is totally different from the forces pension. Everyone who has paid any NI contributions is entitled to it.

If he really has never claimed then I think a call to the pensions service is required to find out.

For people who reached State pension before 6/4/2016 they normally have the choice of either taking the pension deferred either as a lump sum or an increased pension but this is following a change to the rules around 10 years or so ago.

If possible the lump sum would probably be the better option if it is available as the amount would be significant. It would be subject to tax but if he is a basic rate taxpayer this particular lump sum does not push you into the next band no matter how large the sum is.

He needs to clarify things with DWP.

GunJack

greenglide wrote: »

State Pension is totally different from the forces pension. Everyone who has paid any NI contributions is entitled to it.

If he really has never claimed then I think a call to the pensions service is required to find out.

For people who reached State pension before 6/4/2016 they normally have the choice of either taking the pension deferred either as a lump sum or an increased pension but this is following a change to the rules around 10 years or so ago.

If possible the lump sum would probably be the better option if it is available as the amount would be significant. It would be subject to tax but if he is a basic rate taxpayer this particular lump sum does not push you into the next band no matter how large the sum is.

He needs to clarify things with DWP.

and even better if all he has is his army pension and doesn't pay tax at all, the entire state pension lump sum should be tax free...

hugheskevi

Assuming your father-in-law turned 65 in 2001, then I think the rules are that the period of deferral between the time he reached age 65 and April 2005 would have to be taken as higher pension, with each year of deferral increasing his pension by 7.5 percentage points.

So if he reached 69 in April 2005 after exactly 4 years of deferral his State Pension would increase by 30%.

For the period after April 2005 there should be a choice between taking a higher State Pension (increasing State Pension by 10.4 percentage points per year of deferral), or a lump sum payment of the amount deferred with interest applied at 2 percentage points above the Bank of England base-rate.

This link gives a good explanation of the history...http://www.parliament.uk/briefing-papers/SN02868.pdf

eastcorkram

OK. Thanks for the replies. I've spoken to the dwp, and they have sent out the forms. We've filled these in, and returned them. I've no idea of the time scale from here on.

Going through the paperwork, I've noticed on his P60 notifications, there is a reduction each year for state pension. For example, his P60 for 2006-07, has a tax free allowance of 5035, then a reduction of 4379 (state pension), leaving a tax code of 65L.

As I've said, he says he has never had the state pension. He only has one bank account, and has every statement he's ever received! There is only one incoming payment each month, and that is the army pension.

Do Hmrc just assume he's been getting it because of his age? If so, does that mean he has been on the wrong tax code for 15 years?

bigfreddiel

Hmmm, if his tax code has been adjusted, maybe he has been receiving his sp. Check his bank statements.

kidmugsy

Be careful about claiming the owed pension this early in the tax year. For example, suppose he draws his State Pension, incremented by 30% as described by hugheskevi. Suppose this plus his army pension (and any other taxable income) gives him an income of more than £11k this tax year. That will make him a 20% tax payer, and he'll lose 20% of the lump sum when he draws that.

If, however, he deferred drawing his State Pension until later in the tax year and that should happen to give him a tax year income of less than £11k, then his income would be tax-free and accordingly his lump sum would be tax-free too.

If his army pension already takes his income over £11k then this argument doesn't matter (unless he should be anywhere near the 40% tax threshold).

P.S. if his "other income" is less than £11k, please say so and I'll reveal a happy notion that has just occurred to me.

bigfreddiel

The suspense is killing me!

eastcorkram

bigfreddiel wrote: »

The suspense is killing me!

Suspense about the statements?

I said in the post earlier. There is no record on any statement, showing him getting state pension.

eastcorkram

kidmugsy wrote: »

Be careful about claiming the owed pension this early in the tax year. For example, suppose he draws his State Pension, incremented by 30% as described by hugheskevi. Suppose this plus his army pension (and any other taxable income) gives him an income of more than £11k this tax year. That will make him a 20% tax payer, and he'll lose 20% of the lump sum when he draws that.

If, however, he deferred drawing his State Pension until later in the tax year and that should happen to give him a tax year income of less than £11k, then his income would be tax-free and accordingly his lump sum would be tax-free too.

If his army pension already takes his income over £11k then this argument doesn't matter (unless he should be anywhere near the 40% tax threshold).

P.S. if his "other income" is less than £11k, please say so and I'll reveal a happy notion that has just occurred to me.

His army pension pays about 1200 a month nett.

Someone up thread, was talking about getting a lump sum tax free, no matter how much it was.
I found that odd. I would xpect him to pay tax on anything. My confusion right now, is that it seems like he's already been paying the tax each year!
It looks as though hmrc just assume he has been getting SP.

Now...... If somehow, he has. Then they'll just turn down the application we've just sent, and that will be the end of it