Delay pension? Just cant make my mind up

antdon

I am 60 at the end of March.
My superannuation pension is due to pay from then..
I have a fairly serious chest condition .. bronchiectasis, but currently manage ok in work as an electrician....
My question is....   Should I delay the payment of my pension for several years?
My concern is that if, during the next 6 years, until my official retirement age...  I become unfit for work or i am made redundant ..... I would be entitled to no benefits as I would be receiving a small pension £6500......
I believe my pension, if delayed, would increase roughly 3% per year....
Any advise would be very gratefully recieved.........

Dazed_and_C0nfused

I'm assuming this is a defined benefit (final salary) type pension.

What happens to the pension you aren't taking when you do eventually decide to take it?

Do you get it as a lump sum?  Or an increased monthly amount (on top of the 3%)?  Or is is just lost for ever?

antdon

Hi
This is a deferred superannuation pension from a company I worked fro 20 years ago.....
If I understand it right.....
At 60 I will get approx £20k lump and £6500 annual pension....
If delayed the pension and lump would increase by 3% per annum.
So,  if I dont take it I will miss out on £30k after tax over the 6 years until I retire... but my pension would increase by approx 20%
On a purely financial level  I would probably just take the pension.....
But the irony is if I took the pension and had to retire early on I'll health.. I would get no benefits, and actually be getting less from the pension than I would be getting from benefits

swindiff

Will it not increase each year if you take it at 60?

antdon

swindiff said:

Will it not increase each year if you take it at 60?

RPI  or cpi....
I will have to check,  but I am pretty sure the 3% is on top of the rpi .....

[Deleted User]

Are you expecting to become unfit for work, or be made redundant, or pop your clogs in the nect six years?  The benefit of hindsight, and from experience whatever you decide to do will be wrong!
If you're not sure and you don't want to retire now, I'd suggest wait a bit. If your health deteriorates so you can't work, at least you're earning in the meantime. On the other hand, if you retired now, maybe you could do a few of the things you want before health issues stop you completely.  Could you work part time to supplement your pension?

t0rt0ise

Will they allow you to defer a pension and then claim benefits? There are rules about this sort of thing. You might want to find out before you make a decision.

Albermarle

You should also think about the tax situation . Pension income ( not the lump sum ) is classed as taxable income , including the state pension.
As you have a tax personal allowance of £12500 ( currently ) then if you took the pension at 60 and stopped work , you will not pay any tax on it ( assuming no other income ) . If you took the pension and continued to work, full or part time , then it would be taxed ( presuming combined your income was over £12500) .
Then of course when you reach state pension age , assuming you get the full pension , the two pensions combined will be over £12,500 ( but not by that much )

DairyQueen

A late retirement factor on a DB scheme of (only) 3%, suggests that, taking the pension now would be worthwhile. This assumes that once in payment the pension would increase with inflation anyway. If so, the late retirement factor is currently marginal and, if inflation moves above 3%, then the delay will reduce, not increase, your pension in real terms. You would have to live a very long life to hit break-even by delaying. As you have health issues (and forgive me for saying this) you may live less than the average life span for someone of your age, and that could compound the impact of the delay.

You would however be taxed on the pension which reduces the benefit. One way to circumvent this would be to redirect the gross value of the pension into another pension plan. Defined Benefit schemes are exempt from the MPAA restriction once crystallised and recycling rules would not apply in this instance. Thus you would effectively be delaying paying tax on the pension until you drawdown. You would also be building a 25% tax free lump sum on the contributions made to the recipient scheme.

You foresee that you may be forced to retire before state pension age and you are concerned that the pension-in-payment would reduce your benefit entitlement in the interim. I am not clear on the rules regarding means-tested benefits if a pension is accessible (DnC will know). If you have reached the pension's NRA (normal retirement age) as apparently will be the case, you may be assessed as if you are receiving the pension regardless of whether it's in payment. If so, this adds weight to the argument to take the pension. If however the pension will be excluded in a means-tested benefit assessment then there is a possibility that you could be worse off. It would depend on the amount of support you would receive excluding and including the pension.

One option would be to take the pension and 'recycle' as suggested above. If you then retire and benefits are impacted because the pension is in payment you would be able to supplement your income with these extra funds. If OTOH you continued to work until state pension age then the proceeds of the recycled plan would be an additional source of income.

jamesd

Your health suggests that you should consider transferring to a personal pension. Unlike a superannuation pension the amount you can get from buying an annuity increases as you get sicker (but not once you've bought it). While it depends on your health you could easily find that you'd get more whatever happens.

You'd also have the option not to spend it all on annuities at the start, which would work out well if you did become less well.

You must take financial advice by law before transferring and the adviser can check how much you'd get as part of that advice.

antdon

Many thanks for all the replies......
Probably be ' bird inn the hand' scenario .....lol