Delaying State Pension

Johnnyy_Boy

I am 67 in a couple on months and have delayed my pension for a year. Currently still working and may continue for another year. A 40% tax payer.

if I carry on working, am I better off not claiming for it and leaving another year ? 

Dazed_and_C0nfused

If you don't need the income now then deferring it will increase your future payments.

Will you be a 20% or 40% taxpayer when you think you will eventually start taking the State Pension?

Johnnyy_Boy

Dazed_and_C0nfused said:

If you don't need the income now then deferring it will increase your future payments.

Will you be a 20% or 40% taxpayer when you think you will eventually start taking the State Pension?

Probably a 20%. Don’t think I will go over the 40% mark.

xylophone

You could consider taking the state pension and using it to increase your pension contributions?

Johnnyy_Boy

xylophone said:

You could consider taking the state pension and using it to increase your pension contributions?

That sounds like a good idea.

Audaxer

Johnnyy_Boy said:

I am 67 in a couple on months and have delayed my pension for a year. Currently still working and may continue for another year. A 40% tax payer.

if I carry on working, am I better off not claiming for it and leaving another year ? 

Delaying the State Pension for a year is a bit like buying an annuity, with a very good rate of income of 5.8% the following year, and every year thereafter increasing with inflation, so it is a good deal in my view if you want extra guaranteed income. On the downside it will take a long time to recover the amount deferred. However if you claim it while working and if you will be paying 40% tax on it, that might be another good reason for deferring it until you stop working.

PennyForThem_2

I deferred the old SP when I could have claimed it at 62.  This was 10%+ something interest p.a..  So yes, could have not done that, but was working (NHS - DB pension)  and did not give up work until 68.  I love my enhanced SP - it is a very nice safety net.  

If I had put the SP I had got at 62 I would not be so comfortably off.  My thoughts are:

1.  Defer if you are still working - no brainer really even at lesser 5%
2.  If you are comfortably off without SP, maybe that extra will pay for cleaning house/gardening etc
3.  Remember SP dies with you - you cannot pass it on (there are exceptions to this rule, lol)
4.  Risk assessment - if you are in poor health maybe take it as soon as available and put into investments if you do not need the extra income.

nigelbb

It's by no means clear cut that deferring is worthwhile now the increase is only 5.8% not the 10.4% uplift it was formerly. Average life expectancy at state pension age is about 20 years but it's going to take almost that long to recoup one year of deferred pension. I made the decision that I was better off with a bird in the hand so I draw my pension but as I continue working & am a higher rate taxpayer I pay it all into a pension.

QrizB

nigelbb said:

It's by no means clear cut that deferring is worthwhile now the increase is only 5.8% not the 10.4% uplift it was formerly. Average life expectancy at state pension age is about 20 years but it's going to take almost that long to recoup one year of deferred pension.

Others on this forum have previously recommended deferring for a year or two as a form of longevity insurance, against the risk that you'll outlive your drawdown.

Audaxer

QrizB said:

nigelbb said:

It's by no means clear cut that deferring is worthwhile now the increase is only 5.8% not the 10.4% uplift it was formerly. Average life expectancy at state pension age is about 20 years but it's going to take almost that long to recoup one year of deferred pension.

Others on this forum have previously recommended deferring for a year or two as a form of longevity insurance, against the risk that you'll outlive your drawdown.

Yes, if you want/need a bit extra income at a rate of 5.8% increasing with inflation each year, it's definitely worth considering as none of my investments guarantee that return every year. 

Linton

Audaxer said:

QrizB said:

nigelbb said:

It's by no means clear cut that deferring is worthwhile now the increase is only 5.8% not the 10.4% uplift it was formerly. Average life expectancy at state pension age is about 20 years but it's going to take almost that long to recoup one year of deferred pension.

Others on this forum have previously recommended deferring for a year or two as a form of longevity insurance, against the risk that you'll outlive your drawdown.

Yes, if you want/need a bit extra income at a rate of 5.8% increasing with inflation each year, it's definitely worth considering as none of my investments guarantee that return every year. 

Yes, a better rate than an inflation linked annuity, at least until you get to your 80s.