deferred state pension

MSE_Clare

We've just published a new guide on 'Should you defer taking my state pension?'

We'd love to know your thoughts and feedback.

dealyboy

Great update @MSE_Clare ...

One thought ... as in my case (I deferred for less than a year) rather than taking SP and paying tax on it when my earnings in the year I became eligible for SP already exceeded my personal allowance, the consequences of the unanticipated freezing of personal allowances means that after SP and extra state pension I have less allowance left than I otherwise would.

This means that contributing £2,880 to my SIPP and withdrawing £3.600 attracts more tax than it otherwise would.

simpkin

@MSE_Clare .  I had a look and seems to be clear and concise.

That said, I read it to see if it dealt with the following (it doesn't)

I don't need the SP - as I'm still working. Instead of deferring, is there any advantage in taking the SP, but adding it all to a personal pension pot? (which should not incur any addition income tax)?

xylophone

You could regard your SP as an earned income replacement, enabling you to make higher contributions to your workplace pension from your salary.

Steve_666_

I did some crude modelling of deferment against taking the SP and  increasing my SIPP contributions by the gross pension value. Then buying an annuity (fixed and escalating at 3%) with the SIPP contributions. My Life expectation was set to a minimum of 20 years, when I played with the figures the deferment at 1/9 of 1% per week looked the best option. I wasn't trying to get an exact figure, just a feel for how many years for the deferment to surpass the SIPP/Annuity options. I'm intending to work a few years beyond my retirement age, wont be taking my state pension until I retire.

Stubod

Hi all, and thanks to the OP for this thread and the replies. I was fully intending to defer my own SP for either 1 or 2 years, and I was not aware of the "indexing" on the deferred element which has now been clarified. While I like the idea of a little extra index linked SP, I now think that deferring for 2 yerts is probably too long, so will just go for the one year. (Mainly becasue my rather limited deferred private pension does not have any index linking once taken).

So thanks for clarifying the mechanics of this..

Steve_666_

 I'm intending to work a few years beyond my retirement age, wont be taking my state pension until I retire.

I said this in an earlier post, but am having doubts. I tried to find on the UK govt web pages, how the 5.8% annual deferment is calculated. I have a pension forecast in excess of the new state pension amount, so am assuming that my calc was based on the old state pension plus additional state pension(serps/2nd state pension), like most I was contracted out for some years. For example if the forecast said £246, it would be  £156 OSP and £90 additional payment. Does the annual 5.8% also apply to the addition pension or just the OSP?

p00hsticks

Steve_666_ said:

 I'm intending to work a few years beyond my retirement age, wont be taking my state pension until I retire.

I said this in an earlier post, but am having doubts. I tried to find on the UK govt web pages, how the 5.9% annual deferment is calculated. I have a pension forecast in excess of the new state pension amount, so am assuming that my calc was based on the old state pension plus additional state pension(serps/2nd state pension), like most I was contracted out for some years. For example if the forecast said £246, it would be  £156 OSP and £90 additional payment. Does the annual 5.9% also apply to the addition pension or just the OSP?

When do / did you actually reach State Pension Age ? 
If after April 2016, then you fall under the nSP transitional rules and your entitlement will be made up of the new State Pension and a 'Protected Payment' which is an additional element carried over from your pre-2016 SERPS/S2P. 

Steve_666_

p00hsticks said:

Steve_666_ said:

 I'm intending to work a few years beyond my retirement age, wont be taking my state pension until I retire.

I said this in an earlier post, but am having doubts. I tried to find on the UK govt web pages, how the 5.9% annual deferment is calculated. I have a pension forecast in excess of the new state pension amount, so am assuming that my calc was based on the old state pension plus additional state pension(serps/2nd state pension), like most I was contracted out for some years. For example if the forecast said £246, it would be  £156 OSP and £90 additional payment. Does the annual 5.9% also apply to the addition pension or just the OSP?

When do / did you actually reach State Pension Age ? 
If after April 2016, then you fall under the nSP transitional rules and your entitlement will be made up of the new State Pension and a 'Protected Payment' which is an additional element carried over from your pre-2016 SERPS/S2P. 

This summer, I don't have my calculation and trying to get hold of it in time to make a decision from HMRC at the moment isn't possible. So would it be £203 NSP and £43 PP, does the annual 5.8% deferred only apply to the NSP component?

I'm pondering on taking the pension, and putting 80% into a SIPP fund that is paying a dividend of about 5% and save the 20% to cover the tax liability. I wont be paying 40% tax on this, I will make sure my other pension contributions are large enough. The index linked SP is attractive, but I think with dividends, modest fund growth, and  smallish drawdown  starting about 10 years in would be better.

Audaxer

I am due to claim my SP next year. I've been paying voluntary NI of about £800 a year for 5 years, with 2 years still to pay. If I have calculated correctly each £800 a year NI payment increases my forecast pension by about 3%, which I think is a very good deal. If I subsequently defer for a year to increase my SP by 5.8%, that is at the expense of losing about £8,400 SP income after tax, so looking at it that way, I don't think it is worth deferring in my case.