Defer SP and starting rate for savings: Sense check?

annaccordion

Thanks all for the useful input. Much appreciated.

I'll think I'll 'pass' - it was in the balance until I found out what happens in one's early demise whilst in deferment - see below.


https://forums.moneysavingexpert.com/discussion/comment/74561432#Comment_74561432

jamesd

Term life insurance is cheap for good deferral candidates and can deal with that. It'll pay the specified lump sum in the event of death.

polymaff

annaccordion wrote: »

Thanks all for the useful input. Much appreciated.

I'll think I'll 'pass' - it was in the balance until I found out what happens in one's early demise whilst in deferment - see below.


https://forums.moneysavingexpert.com/discussion/comment/74561432#Comment_74561432

Deferments can be inherited.

soulsaver

polymaff wrote: »

Deferments can be inherited.

Care to explain? Got a link?

polymaff

Sorry, but not for a New State Pemsion

polymaff

annaccordion wrote: »

Thanks all for the useful input. Much appreciated.

I'll think I'll 'pass' - it was in the balance until I found out what happens in one's early demise whilst in deferment - see below.

Your call, but it would have to be sudden death to be a problem.

I've been dealing with a case very similar to yours. A lady with occupational pensions just about using up her Personal Allowances and with quite a bit of taxable savings income. My advice, taken, was to defer for three to five years. This meant a saving of almost £1,000 per year in her tax liability. Two years after deferring she developed a brain tumour and, after emergency surgery and then a life's-worth of radiotherapy she was given 4-6 months to live. So, even in these dire circumstances she had the opportunity to un-defer.

soulsaver

polymaff wrote: »

Your call, but it would have to be sudden death to be a problem.

...even in these dire circumstances she had the opportunity to un-defer.

There is an un-defer option?
You get you deferred pension paid as a lump sum?
I knew that a lump sum is available in the old pensions, but thought that was another unavailable in 'new pensions', too?

polymaff

soulsaver wrote: »

There is an un-defer option?

Has to be if you are ever to benefit from the SP?

soulsaver wrote: »

You get you deferred pension paid as a lump sum?

She did.

I've entered this discussion, and then described this similar history to the OP's to highlight the problem both cases face(d) with respect to being incrementally taxed on the SP at up to 40% - something not generally recognised - or correctly addressed in HMRC's SA software for a long time.

Also to demonstrate that others have faced the issue she fears - and found DWP and HMRC to be very sympathetic to such an awful predicament. Incidentally - despite the experts' opinion - the lady is still alive, albeit brain-damaged, a year beyond that 6-month deadline.

Silvertabby

Mr S reached SPA recently (I've still got a bit to go) and we considered this - but decided against it.

It may have been different if the increase was still 10%+ and/or he would pay tax on his State pension if he had still been working (but not pay tax in retirement).

However, the increase of just over 5% plus the fact that he will always pay 20% tax on his State pension income led us to the decision to take it now. Yes, it will go into a safe savings account paying less than 5% - but a bird in the hand and all that.

annaccordion

Yes I believe that the pre 04/2016 SPa offer is a no brainer to defer if you don't need the money immediately to live on.

I've seen well respected people on here describe the new rules as (still) being a 'no brainer' to defer.

I definitely don't see it as that clear cut, even with the advantage of the unusual circumstances & under current rules that allows a £1k tax gain to defer.