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Dazed_and_C0nfused

Deleted_User said:

I turn 60 in a few months time and have a Civil Service Pension from years ago. I get a lump sum and annual amount - index linked.

I don't need the money right now. With inflation going through the roof and investments looking dicey I quite like the idea of my lump sum staying where it is and keeping it's index linked protection until inflation has done it's worse.

My approach to retirement is to live well until mid seventies - statistically speaking things start to go downhill after that and I don't want to be scrimping now just to have my hard earned savings used to keep me dribbling in a corner in a very expensive 2 star hotel. So I want to use up most of my assets in the next 15 years. I'm quite prepared to live frugally after that - or check out voluntarily if that's an option. 

So - say I defer for 2 years. That protects my lump sum. BUT it means losing 2 years of my pension (I presume?). Now I presume that by deferring I'll get a larger pension that would make up for the two lost years IF I LIVE LONG ENOUGH. But keeping in mind that I don't particularly WANT to live a long life...

Last time I checked the lump sum was around £10k and the annual pension was £3k. 

Why do you think it would be increased by inflation if you chose to take it after your normal pension age?

Secret2ndAccount

I believe that CS pensions receive uncapped inflation increases both in accrual and in payment. We have some CS experts around here who will correct me if I'm wrong.
So your CS pension will be calculated the same way every year. Your choice is take it or leave it. There is no reward for deferring from 60 - 65. You just lose the money. You might be right about the lump sum - I don't know - but you will never make your lost money back. Take the pension at 60. Do the best you can with the lump sum. You can get 5% interest fixed for 2 years right now. Or spend it before inflation gets to it. Or retire a few months earlier.

hugheskevi

The member appears to be a deferred classic member. In that case, if they do not claim their classic pension at age 60 they will receive arrears of pension back to age 60 when they do claim their pension (note - the position is different for active members, who would just lose the pension).

I think (but am not certain) that the lump sum paid would just be whatever it would have been at age 60, as would the backdated pension as that is the point at which entitlement to the pension arises under the rules even though it has not been claimed, ie, there would be no interest due for late payment and it would just be paid as arrears. There could also be a higher tax charge, as all the pension income would be taxable in the year of receipt and so potentially taxed at a higher rate.

It should be confirmed with the scheme administrator - in writing - exactly what would be paid out, which is likely to be easier said than done.

bluenose1

Pretty certain there is no financial benefit not claiming it at 60. If you claimed it at 62 all you would get is the arrears as if you had claimed it at 60. If you have no need for it i would just put in in the highest fixed rate i could find.

GunJack

hugheskevi said:

The member appears to be a deferred classic member. In that case, if they do not claim their classic pension at age 60 they will receive arrears of pension back to age 60 when they do claim their pension (note - the position is different for active members, who would just lose the pension).

I think (but am not certain) that the lump sum paid would just be whatever it would have been at age 60, as would the backdated pension as that is the point at which entitlement to the pension arises under the rules even though it has not been claimed, ie, there would be no interest due for late payment and it would just be paid as arrears. There could also be a higher tax charge, as all the pension income would be taxable in the year of receipt and so potentially taxed at a higher rate.

It should be confirmed with the scheme administrator - in writing - exactly what would be paid out, which is likely to be easier said than done.

Think I'm going to have to keep this reply ( thanks @hugheskevi ) as this could be worthwhile for me... I'm deferred Classic, and looking to retire by 62 - If I can defer until I DO retire, even with the arrears I could save a pile of 40% tax

On the other hand, if I get to go earlier......

xylophone

as all the pension income would be taxable in the year of receipt 

Not necessarily.

https://www.gov.uk/hmrc-internal-manuals/self-assessment-manual/sam121160