Deferred state pension

moneymoney131313

My birthday is 13/12/1955 so pensionable last December this I deferred as I am still in work 4 days a week 
If I were to now claim it what would I get and does it make any difference to my salary?

molerat

You get a pension increased by 1% for every 9 weeks deferred (equivalent to 5.8% pa).  Your pension does not affect your salary but as it is taxable income the value will be deducted from your tax code so you will likely see a reduction in take home pay.

xylophone

https://www.gov.uk/deferring-state-pension/what-you-get

If you reach State Pension age on or after 6 April 2016

Your State Pension will increase every week you defer, as long as you defer for at least 9 weeks.

Your State Pension increases by the equivalent of 1% for every 9 weeks you defer. This works out as just under 5.8% for every 52 weeks.

The extra amount is paid with your regular State Pension payment.

Example: You get £185.15 a week (the full new State Pension).

By deferring for 52 weeks, you’ll get an extra £10.70 a week (just under 5.8% of £185.15).

This example assumes there is no annual increase in the State Pension. If there is an annual increase, the amount you could get could be larger.

State Pension is taxable but paid gross - once it comes into payment, HMRC will adjust the tax code on your employment income to take account of the pension.

moneymoney131313

Have I lost out not taking the pension that would have been £185.15 a week?

Shedman

moneymoney131313 said:

Have I lost out not taking the pension that would have been £185.15 a week?

Well the straightforward answer to that is....depends how long you live.  

You have forgone around 30 weeks of pension so roughly £5,550, although if it would have all been taxed at 20% then around £4,440.   There would be a 3% uplift in your pension due to deferring (3 complete 9 week periods) so you will get an extra £5.55 a week pension (£4.44 if taxed).  Therefore, ignoring any indexation for simplicity, you would have to live about another 1000 weeks i.e. 20 years or around 86 years old to start 'winning'. 

Linton

moneymoney131313 said:

Have I lost out not taking the pension that would have been £185.15 a week?

In my view the main advantage of deferring is not to make or lose money - the numbers are set so that you break even close to your life expectancy.  Where you gain is that you spend extra assets in the early years and gain guaranteed inflation linked income to cover your later years..  This can be valuable if for example some of your other income is fixed or capped at a low level and so of decreasing value over time.

xylophone

Might be better to take the SP and (while under 75) contribute to a pension.

Audaxer

moneymoney131313 said:

Have I lost out not taking the pension that would have been £185.15 a week?

If you were to defer for a year you will have missed out on about £7,700 after 20% tax. However your State Pension will have increased by 5.8%, increasing with inflation every year for the rest of your life. So I think of that as quite a good investment, rather than a year's missed income.

Dazed_and_C0nfused

moneymoney131313 said:

My birthday is 13/12/1955 so pensionable last December this I deferred as I am still in work 4 days a week 
If I were to now claim it what would I get and does it make any difference to my salary?

It won't alter your salary but it will reduce your take home pay.

State Pension taxable income but is paid without tax being deducted.

To make sure you pay the tax due HMRC factor State Pension into your tax code meaning you get the State pension in full but pay extra tax on your job.

Linton

xylophone said:

Might be better to take the SP and (while under 75) contribute to a pension.

Yes, since if you leave taking the annuity to say 80-85 the rates should be good, I guess significantly better than the 5.8% from deferring.  However the amount you can contribute to a pension will be much more limited so one perhaps would be looking for a purchased life annuity paid from from taxed money but subject to less tax. I havent researched this option.