Should I defer collecting my state pension?

AuntyJean

I'm female and reached state pension age in 2021. Having only paid married woman's stamp for many years I obtained a forecast showing I could obtain contribution from my ex husbands contributions which almost brought me up to basic full pension. However, I have continued to work so deferred collecting my state pension as it would be taxable. Will the changes in April affect me? Should I continue to defer or collect my state pension. I intend to work for another three years. 

Dazed_and_C0nfused

It's always going to be taxable, whether you are working or not.

What changes are you referring to?

Stubod

The longer you leave it the more it will be worth, but there comes a point when it is no longer cost effective to defer it, (based on how long you think you will live?). It increases by about 5.8% for each year you don't take it, but obviously you "lose" a years worth of taking it.

I suppose it depends whether you need the money (or not), and how long you think you will live for and how much private pension you have on top. As above any income you have over the £12,500 ('ish) annual tax free allowance will be taxed anyway.

I was planning to defer for 1 or 2 years as I don't have much in the way of an index linked private pension,  but I would have thought more than 2 years and you may well not see a "return/benefit"?

prowla

Dazed_and_C0nfused said:

It's always going to be taxable, whether you are working or not.

Presumably their context is whilst they are working for the next 3 years.

Steve_666_

HI
I had this conversation a few months back, was trying to work out which was better, the uplift in state pension which is indexed, or taking the additional cash and increasing pension contribution by the pension gross amount.
Found it difficult to figure, but eventually decided I would defer for the 2+ years I intend to work beyond my retirement age.

https://forums.moneysavingexpert.com/discussion/6385267/state-pension-and-working/p1

If you can usefully use the additional cash then take it, else I would favor deferring

luvchocolate

I deferred for 2 years whilst still working..granted it was the old pension so a much better deal...but it worked for me as works pension is quite small 

GibbsRule_No3.

Dazed_and_C0nfused said:

It's always going to be taxable, whether you are working or not.

What changes are you referring to?

I wonder if it was that at one time people of SP age still working would be paying NI towards the NHS from April.  It would have affected me but I think they have scrapped that idea.
I continued to work after my SP age, I was not expecting to still be working now, or I might have deferred the SP rather than take it, more usefully I should have paid more into my Stakeholder Pension that I took out, via salary sacrifice, allowing less tax to be paid but I was not expecting Covid and working this long.

I noticed just now I paid £4500 in tax last year, from SP, two Private pensions and a two day working week, I’m sure if I was more knowledgeable I could have saved some money by not paying as much tax.

Secret2ndAccount

On a statistical average basis, it's probably worth it for a statistical average person to defer for a couple of years. However, I haven't met many statistical average people. The gain or loss from taking it now or later is typically next to nothing, so you should actually do what suits you best.
If taking the pension now would push you into a higher rate tax band, then definitely defer.
If you would value the lifelong higher pension as you aren't totally sure how you will make ends meet, then defer.
Money now, or money later: which is more useful to you?
Left field idea: take the pension now, and pay the money into a SIPP, or your workplace pension. Many people will say this is a bad idea. They might be right: you are trading a guaranteed, inflation proof, lifelong pension for a risk-based investment which could run out. Here are the reasons it could be a good idea:
1. State Pension cannot be inherited. The money in a SIPP can. So, if you die youngish, then you are likely to pass on more to your estate this way. If you live to a ripe old age, it might have been better to take the extra SP and save a few quid every month - the final inheritance pot could end up larger.
2. If you need a lump sum, e.g. a hip replacement at 70, you can empty a SIPP in one go, whereas the SP is only a regular monthly payment. Conversely, if you don't need the money, you can leave it in the SIPP, and some of the investment growth will be tax free.
3. If your employer offers salary sacrifice, the amount going into the pension will be more than the cost to you, as you save National Insurance. This could help the pension investment keep pace with or outperform the SP.

sheslookinhot

A regular question. No one knows how long they will live. I’ll be drawing SP as soon as I can.

Steve_666_

Secret2ndAccount said:

....
3. If your employer offers salary sacrifice, the amount going into the pension will be more than the cost to you, as you save National Insurance. This could help the pension investment keep pace with or outperform the SP.

To qualify for SP, you will no longer be paying NI