deferred state pension

chatq

I’ve just been notified of my state pension after deferring for 2 years 2 months. DWP have paid for the latest year deferred as a lump sum and the remaining deferred period as an increase in weekly pension. 

Do I have to accept a lump sum which is taxable or can I insist on the weekly pension increase?

molerat

When you claimed it should have asked for a date to commence the pension from which can be up to one year ago with that being paid as a lump sum.  Did you give a start date ?

1957DfurdPensionist

chatq said:

I’ve just been notified of my state pension after deferring for 2 years 2 months. DWP have paid for the latest year deferred as a lump sum and the remaining deferred period as an increase in weekly pension. 

Do I have to accept a lump sum which is taxable or can I insist on the weekly pension increase?

@chatq, your case is very interesting to me, and no doubt very many others.

To date I am deferred a total of over 17 months.  I have claimed by telephone but am yet to receive any info in the intervening 3½ months I've been waiting since claiming, despite chasing.  In recent calls I have been given conflicting information about whether I can still take a lump sum or whether I somehow have lost my right to choose.

When I claimed, I did project forward approximately 4 months from the telephone claim date in order to suggest an SP start date which was using an exact multiple of 9 weeks.  I have since been told that I still have a choice.

Earlier in this thread I see some have restated the 1% per 9 weeks as "1/9% per week" which mathematically is not consistent if both are rates.  Strictly, a number increased at a rate of 1/9% per week would yield +10.46% correction: +1.004% over 9 weeks.   On the other hand, the more commonly stated +1% per 9 weeks is not consistent with the +5.8%pa that is also broadly understood, either, viz 1.01^(52/9)-1=+5.92% !  I only just discovered that second surprise!  Am I going mad in my old age? Edit: No but @dealyboy has subsequently put us right !

Please bear with me, as it sounds like you might now want a full deferral increase and no lump sum, and I would argue that you should still have the choice after they tell you what it actually looks like.  But another piece of info I was given over the phone was that the END of the retrospective payment is NOT the start date you may have chosen NOR your SPa date.  Instead, I have been told it is the day you actually put in your claim.  In addition the lump sum is backdated UP TO 12 months (and not necessarily a full 12 months - your choice I believe) from your actual claim date.   That means that in your case (mine too when we finally get to view the numbers!) there are actually two periods of deferral which should have earned some kind of deferral increase i.e. the period from SPa up to the start of the lump sum period, and then from your claim date up to your start date.

Back to this 9 weeks number: I have been led to believe that only FULL 9 week multiples qualify to earn a deferral increase. Edit: Again @dealyboy has subsequently put us right !  Do you think that is how they have treated you?  For example have they added 5.8% for the first year plus nothing for the lump sum plus another 1% for the let's say 2 months at the end ?  Or maybe the front end of the deferral was less than a year before the lump sum started if your actual claim date was just under 2 years after SPa? Have they added the front and back end deferral periods together and called that the actual total number of weeks and divided it by 9? Or have they done a proper calculation on the entire actual deferral periods, ignoring the 9 week multiples by converting 5.8% pa into a daily rate like all credit cards have easily done for years?  +5.8% pa is ~+0.1545% per day (1.058^(1/365)-1).

I appreciate you might now only be interested in getting the enhancement for the full deferral period, so forgive me picking your brains, but the offer you now have in your hands looks quite pertinent to my own case and maybe to thousands of others at this time i.e. us late baby boomers who have deferred for a little bit.

Last question, if you DO get allowed to dump the lump sum idea (in your place I would be very annoyed if they refused), what sort of overall enhancement do you expect?  If your 2 years 2 months could safely be stated as 2 years 9 weeks, would that mean 1.058 x 1.058 x 1.01 x your original expected nSP (before triple lock effects)?  Cumulatively that would be +13.05%.  Or would you settle for +12.6% (5.8+5.8+1)?
If you are anything like me, you will know that these compound percentage effects, however small can end up making quite a difference eventually especially if the +5.8% should be 5.92%   

1957DfurdPensionist

Sorry - no one noticed my deliberate mistake in the last post when I, 1957DfurdPensionist said:

Earlier in this thread I see some have restated the 1% per 9 weeks as "1/9% per week" which mathematically is not consistent if both are rates.  Strictly, a number increased at a rate of 1/9% per week would yield +10.46% over 9 weeks.   On the other hand, the more commonly stated +1% per 9 weeks is not consistent with the +5.8%pa that is also broadly understood, either, viz 1.01^(52/9)-1=+5.92% !  I only just discovered that second surprise!  Am I going mad in my old age?

that +10.46% number should of course read +1.004%!  But the mathematically minded amongst you might consider the formula 1.001111^52-1 which gives yet another new compund number, +5.94% not +5.80% and not +5.92% either 

1957DfurdPensionist

Just to add some breaking news as just released in another thread, I now have written nSP indications of what deferral means in my case.  I can confirm that I was effectively told this week that the 9 week multiple thing is key such that I was given an opportunity to reduce my deferral by a week or increase it by 8 weeks to match an exact 9 week multiple of 9 or 18 weeks.  Edit: This is a somewhat strange and unnecessary accommodation if @dealyboy is right !  Had there been no point in messing with the first date we thought of for a payment start date, then I am sure they would have told me.  Anyway, I think forum readers may forget the 1/9%pw numbers I was playing with and revert to the 1% per 9 weeks or 5.8%pa deferral enhancements (which of course do not apply to any retropaid lump sum).

The second observation is the lump sum option I was offered - it is actually more than 12 months worth because it is calculated to also include the nearly 4 month backlog delay from the claim date to the current date which I had previously been led to believe would attract a second period of deferral enhancement earning.

In addition, I was permitted to ask for the calculation to assume the retro-payment would start exactly a 9 week multiple from my SPa so the first part of the deferrral would be exactly 9 weeks

So, whilst the backlogs continue (at least I assume that's the reason) it also looks like forum readers who have deferred claiming for well over a year around this time might also be given some flexibility when asking for a lump sum - it might be offered at a bit more than 12 months worth rather than have the most recent part i.e. the part since claim date become subject to a second (additional) deferral enhancement calculation.

I really do now feel quite lucky for the choices DWP have given me to think about, but for the fun of it, I shall still get my scientific calculator out before I finally decide which option to go for, and see if I can recreate the numbers to the penny!

dekerivers

I was never any good at maths, but I can't see any way deferring would be a good option. If I take my pension now and carry on working, and pay tax on 40% of it, that's still about £7000 a year.  If I defer for a year and retire, drop down to basic rate and pay no tax on my increased pension, it would still take a heck of a long time to make up that 7000.  Maybe I'm missing something.

Freecall

The real question is, what pension could you buy for that £7,000?

Drop in to some annuity calculators and plug in some numbers.  Something along the lines of a fiver a week perhaps for an index-linked income.

dekerivers

The real question is, what pension could you buy for that £7,000?

Drop in to some annuity calculators and plug in some numbers.  Something along the lines of a fiver a week perhaps for an index-linked income.

Thank you Freecall - I wasn't really considering an annuity

QrizB

dekerivers said:

Thank you Freecall - I wasn't really considering an annuity

No-one is suggesting that you were.

By deferring for a year you'll get an additional ~£550 a year of index-linked state pension.

It would cost a 68-year-old something like £10000 to buy that on the annuity market. So from that perspective, it's a bit of a bargain.

Freecall

QrizB said:

dekerivers said:

Thank you Freecall - I wasn't really considering an annuity

No-one is suggesting that you were.

By deferring for a year you'll get an additional ~£550 a year of index-linked state pension.

It would cost a 68-year-old something like £10000 to buy that on the annuity market. So from that perspective, it's a bit of a bargain.

Exactly this.