Deferred state pension and short life expectancy

noitsnotme

My father in law deferred his state pension.  He is nearly 72 now but due to various illnesses only has a life expectancy of another 3 years.  I believe he may be able to draw the deferred payments as a lump sum now which appears to be best option.  I understand this would be taxable.  If he continued to defer it and passed away, would my mother in law be able to claim his deferred payments?  

He still works earning a modest wage and mother in law receives state pension.

Trying to advise them the best way forward but after years of their heads in the sand and them finding things complicated, it’s challenging!  We are in the process of setting up of Powers of Attorney.

LHW99

He would come under the old state pension rules, so should be able to request a lump sum. I believe that isn't counted as income as such, but would be taxed at whatever rate he currently pays, so if he is a non-taxpayer now, tax wouldn't be due, although it might have to be reclaimed after the event. if he pays basic rate, then it would be taxed at 20% etc.

Dox

Have a look at https://www.gov.uk/deferring-state-pension/tax-and-inheritance which gives a pretty clear explanation.

xylophone

https://www.litrg.org.uk/tax-guides/pensioners/what-state-pension-deferral

noitsnotme

Thanks all.  That seems to cover everything we need to know.