Retirement

Silverbird65

Due to receive small GMP and fixed payt. However not due to really retire till 66 next year so will continue working. The dilemma is do I take pay tax on the GMP . If I defer they have said I will get 1/7th of each complete week after 7th week of deferment. Any post 88 GMP will escalate 3%. So the pension GMP is 1417 pa so how do you work it out? Is it beneficial to wait?Any help guys

Thanks

xylophone

Is this your husband's pension to which you refer here

https://forums.moneysavingexpert.com/discussion/comment/79264555#Comment_79264555

Silverbird65

Yes that's it but we have more info now about what happens if he doesn't take it now .
Thanks

xylophone

This appears to be a S32 pension policy.

I am a little puzzled - has the insurer told you that he can take the PCLS but defer the annual pension (which is all GMP)? This seems unlikely.

Or is the idea that he would not access the pension until he has retired from paid work?

When he does take the GMP pension,  it will be added to his other income for the year and tax paid as appropriate.

https://www.gov.uk/guidance/provide-a-pension-for-your-scheme-member

The  up to 3% increase to which you refer will only apply to post 88 portion of the GMP. 

Silverbird65

This is what they sent us:the maximum tax free sum of the plan will 25% of the plan value. The GMP must be purchased first only any excess funds available must be used to provide additional annuity /lump sum. The GMP will increase by 1/7th for each complete week from deferment from SP age (66) until you decide to take your benefits this will begin 7th week of deferment any post 88 GMP will escalate 3% per annum.
All funds are post 88. 
Clear as mud. When I ask the dept that deals with the nut and bolts is a closed dept so you have to wait for written conf which takes ages. 
Thank goodness its not a large pension pot 

xylophone

https://forums.moneysavingexpert.com/discussion/comment/79237672/#Comment_79237672

1. 1416 +annuity 285 per annum with spouse at death 708
2. 1416+252pa spouse 834 at death
3.1416 spouse 708pa  + lump sum 5542.

The  choice offered was as above?

The £1416 is the GMP (all post 88). This will increase in payment at up to  3% CPI  per annum.

He then has a choice of a very tiny amount on top of the GMP  (I assume this is non increasing as you have not been told that it will increase in payment) or he can commute that tiny amount to a tax free PCLS of £5542.

His inclination is to take option 3?

He can choose to defer payment of the GMP and the PCLS.

He has not been told that he can take the PCLS but defer payment of the GMP? 

If chooses to defer the GMP ( from link above)

Payment of a scheme pension (including the GMP element) may be deferred after pensionable age if the member continues in employment. However, the member must consent to deferment if the:

• GMP relates to a different employment to that in which they are currently employed
• deferment includes a period which is 5 years after they reached age 60 for women and 65 for men

If the deferment is for 7 weeks or more, the scheme must increase the GMP by one seventh of a per cent for each complete week in the period of deferment. The increment calculation is based on the pension value at the end of the period of deferment which will include any inflation proofing.

Silverbird65

Ok so if he waits till he is 66 next year the 1417 will be a larger sum. Of course the lump sum will depend on the rise or fall in units as some is in stocks. It's such a small amount but obviously we want maximise. Thanks

xylophone

He could consider taking the pension and lump sum, regarding them as income replacements and contributing from his final year's salary to a pension?

Silverbird65

Is it worth it for one year contributing to pension?

xylophone

Is it worth it for one year contributing to pension?

This was discussed before in thread linked above. It doesn't have to be just one year. 

But even for one year, he would gain the tax relief on a pension contribution.

The contribution could be left in cash and after a year he could take a 25% tax free PCLS  and draw down to suit his tax position.

Other posters have mentioned using Hargreaves Lansdown SIPP as no charge is made for holding cash or for drawdown.

Or does he have a current workplace pension?

Silverbird65

No pension . Will consider sipp