Due to receive my pension

MK62

jamesd wrote: »

More than zero after inflation? Maybe. If you can do that then substitute that after inflation number for zero.

Part of the issue is longevity insurance. Maybe one in four or one in ten will reach a particular age but some plan is needed if it happens. Deferral is a cheap way if more guaranteed income seems desirable.

I don't think anyone is arguing that if you live to 100, then you may be better off if you'd deferred......

In terms of longevity insurance and guaranteed income, you could make the same argument, albeit to a lesser degree, for buying an annuity at 65 too - you may be better off by the time you reach 100.....IF you reach 100....but how many 65 year olds on the eve of retirement would be advised to buy one at the moment?

However you could argue this out till the cows come home - in the end it all comes down to the one great unknown.....when will you die?
Thankfully none of us knows that - in the ideal world we'd all last till 90+ (though the state pension would be bankrupt - but that's another debate...:)), but the reality is that half of us won't even reach "average" longevity (though, fair enough, the other half will)....

MK62

Linton wrote: »

Suppose you have reached SP age with an SP of £8K. This would give you a net income of £6400. Now suppose you just happen to have £6400 in an ISA. If you wished to increase your annual income what options do you have? You are a standard rate tax payer now and in the future.

1) Savings interest from an ISA - income say at 2% so £128/year fixed and the same income for your surviving spouse. £6400 remaining for your beneficiaries.
2) Inflation linked annuity at 3% - £192 for you and £86 for your surviving spouse. Nothing for your beneficiaries.
3) ISA'ed investments - inflation linked drawdown at say 3.5% giving you £224 inflation linked for the rest of your life and the same income for your surviving spouse. Probably.
4) Defer SP for 1 year and use the £6400 to replace your net SP in year 1 - guaranteed annual net income of £371, inflation linked, though for 1 less year. Also the same income for your surviving spouse. Nothing for your beneficiaries.
5) Fixed rate annuity at 5% - £320 fixed for you and £160 for your spouse. Nothing for your beneficiaries.

Now assuming you have no deserving beneficiaries and would find the extra guaranteed income more useful than the lump sum which option makes most sense?

Well, you could assume and suppose a lot of things - nobody is saying that you won't be better off deferring in some cases, though imho it'll mostly be if you live a long time - however I can make some suppositions too....

What if the same person opened a SIPP with his year 1 SP money, and paid that into the SIPP over 3 years, gaining around £2000 in tax relief - then paid himself the difference from that......the money is available at all times, and is still there for your spouse and/or children etc

4) Defer SP for 1 year and use the £6400 to replace your net SP in year 1 - guaranteed annual net income of £371, inflation linked, though for 1 less year. Also the same income for your surviving spouse. Nothing for your beneficiaries.

Not sure what you mean here....

LHW99

Also the same income for your surviving spouse.

Spouses no longer inherit new SP. Its only if retirement happened pre April 2016 that basic SP could be inherited.