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deferred state pension

13

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  • Steve_666_
    Steve_666_ Posts: 235 Forumite
    100 Posts Second Anniversary Name Dropper
    There is another obvious question which could influence this decision, especially in these times of inflation. If I defer for 3 years, the 5.8% per year will be calculated against the SP at the time I decide take it, and not current pension value, from the start of the deferment?
  • Audaxer
    Audaxer Posts: 3,547 Forumite
    Seventh Anniversary 1,000 Posts Name Dropper
    There is another obvious question which could influence this decision, especially in these times of inflation. If I defer for 3 years, the 5.8% per year will be calculated against the SP at the time I decide take it, and not current pension value, from the start of the deferment?
    If someone was deferring, I understood that the 5.8% deferred amount would still be increased, but by CPI rather than by the triple lock?
  • Linton
    Linton Posts: 17,735 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
     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 £23 PP, does the annual 5.9% 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.
    Yes, if the calculation done in April 2016 shows you had already exceeded the value of the new State Pension then you get to keep the extra as the Protected Payment.  The one limitiation is that the Protected Payment only increases by CPI rather than the full triple lock.  On the other hand 50% of the Protected Payment can be inherited by a spouse if you married before 2016.

    I believe the PP is uprated when deferring as the deferment calculation is carried out based on your total SP but have not been able to fund a clear reference to this.
  • pinnks
    pinnks Posts: 1,454 Forumite
    Ninth Anniversary 1,000 Posts Name Dropper Photogenic
    There is another obvious question which could influence this decision, especially in these times of inflation. If I defer for 3 years, the 5.8% per year will be calculated against the SP at the time I decide take it, and not current pension value, from the start of the deferment?
    I thought you just get a 1/9 of 1% increase for each full week's deferral and that is applied to your weekly pension as uprated.  Well that is how I interpret S17 Pensions Act 2014, though I could be mistaken...
  • Steve_666_
    Steve_666_ Posts: 235 Forumite
    100 Posts Second Anniversary Name Dropper
    pinnks said:
    There is another obvious question which could influence this decision, especially in these times of inflation. If I defer for 3 years, the 5.8% per year will be calculated against the SP at the time I decide take it, and not current pension value, from the start of the deferment?
    I thought you just get a 1/9 of 1% increase for each full week's deferral and that is applied to your weekly pension as uprated.  Well that is how I interpret S17 Pensions Act 2014, though I could be mistaken...
    "(4)The amount of an increment is equal to a specified percentage of the weekly rate of the state pension to which the person would have been entitled immediately before the end of that period if the person's entitlement had not been deferred."

    Thanks for that,
    it says "state pension", so you would think that would include the PP.  The 2nd section "weekly rate of the state pension to which the person would have been entitled immediately before the end of that period if the person's entitlement had not been deferred." suggests to me  that it could be interpreted as applied to the pension at entitlement time (66 at the mo) without any subsequent triple lock increases between deferment and take up



  • pinnks
    pinnks Posts: 1,454 Forumite
    Ninth Anniversary 1,000 Posts Name Dropper Photogenic
    Speculating a little here but "us in the transitional phase" are not entitled to a state pension at the full or reduced rate described in S2 and S3 of PA2014 but at the transitional rate in S5 et seq. If you then look at Schedule 1 to that Act, it sets out how the state pension at the transitional rate is calculated and how it is uprated but does not mention the concept of a "protected payment". 

    It appears therefore that, in legislative terms, a state pension at the transitional rate is made up, where appropriate, of what is colloquially called the maximum new state pension and a protected payment but in the legislation is just a state pension at the transitional rate.  In terms of uprating, the protected payment element has CPI applied to it, rather than the same rate that is applied to a state pension at the full rate (legislatively defined as "at least the increase in average earnings" but currently the triple lock).

    If the above is the correct reading of the legislation, it would suggest that the deferral increments would be applied to the state pension at the transitional rate, so to both the amount reflecting what we call the max new state pension and the amount we call a protected payment.

    But others may chime in with evidence to the contrary and if it were me, then I would want it from the mouth of the horse that is DWP...
  • Steve_666_
    Steve_666_ Posts: 235 Forumite
    100 Posts Second Anniversary Name Dropper
    It would be useful if someone who has deferred and then taken their pension could tell us
    1) Is the  deferred payment calculated on the eligible pension at the time initial time of deferment, or on the eligible pension at the time the deferment ends?
    2) The pension value used to to calculate the deferment value, is it the basic state pension(NSP) or is any PP also used for the calculation?
  • Steve_666_
    Steve_666_ Posts: 235 Forumite
    100 Posts Second Anniversary Name Dropper
    Found this, which infers in the last sentence that the answer to question 1) is that its applied to your state pension when deferment ends



  • Steve_666_
    Steve_666_ Posts: 235 Forumite
    100 Posts Second Anniversary Name Dropper
    Am looking for some confirmation. If I apply and take my state pension, I will still be able to contribute up to 60K into DC pensions, that is I wont trigger the MPAA 10K limit. Seems obvious, but I cant find any positive confirmation on the internet?
  • Am looking for some confirmation. If I apply and take my state pension, I will still be able to contribute up to 60K into DC pensions, that is I wont trigger the MPAA 10K limit. Seems obvious, but I cant find any positive confirmation on the internet?
    Taking your State Pension doesn't trigger MPAA.
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