deferred state pension

dekerivers

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.

Ah I see now - thanks a lot for the explanation both.
I'm still considering the options.....

Stubod

At the end of the day it is a gamble based on statistics, as I think it takes about 18 years to "break even", if you defer form 1 year. It looks like they set the rate based on the average life expectancy. I was thinking about defering for 2 years, but decided 1 year was enough (for me), as I don't have much in the way of index linking on my private pensions.

firstdan

Hi I have deferred my state pension for few years and I am on the old system and still at full employment . I intend to cash in my deferred pension in Aug 2025. My question is this: having taken my pension and the deferred part  as lump sum, can I defer it again after taking it for few months?  

xylophone

It is possible for a person already in receipt of the state pension to  choose to defer payments  but this can only be done once,

You have not yet claimed your state pension.

Presumably you could claim it, receive the payments for a while and then defer again (just once more) as above?

See

https://www.gov.uk/government/publications/deferring-your-state-pension/state-pension-deferral-if-you-reached-state-pension-age-before-6-april-2016-extra-information

You should check with DWP.

See also

https://www.litrg.org.uk/pensions/state-pension/tax-state-pension/putting-deferring-claiming-state-pension

https://www.litrg.org.uk/pensions/state-pension/tax-state-pension/tax-deferred-state-pension-lump-sums

Dazed_and_C0nfused

firstdan said:

Hi I have deferred my state pension for few years and I am on the old system and still at full employment . I intend to cash in my deferred pension in Aug 2025. My question is this: having taken my pension and the deferred part  as lump sum, can I defer it again after taking it for few months?  

Presumably you have decided to take the deferral lump sum option?  And as you have deferred for nearly 10 years (or more) now it will be a considerable sum.

If so, remember that there are special rules for how this is taxed and we have had a few posters who misunderstood these and got hit with large unexpected tax bills.

A fairly recent one was £17k to pay when they thought no tax would be due 😳

xylophone

If so, remember that there are special rules for how this is taxed

Explained (with examples) in LITRG link above.

firstdan

Thanks Dazed..I am assuming all my deferred LS taxed at 45% due to my current income. I am not aware of any special tax applicable to deferred LS. It is just another income added to your current income.

molerat

firstdan said:

Thanks Dazed..I am assuming all my deferred LS taxed at 45% due to my current income. I am not aware of any special tax applicable to deferred LS. It is just another income added to your current income.

Nope, the old pension lump sum is taxed at your current tax rate, it is not added to your income so if you are earning below your allowance there would be no tax to pay, a 20% tax payer it will be taxed at 20% etc.

Dazed_and_C0nfused

firstdan said:

Thanks Dazed..I am assuming all my deferred LS taxed at 45% due to my current income. I am not aware of any special tax applicable to deferred LS. It is just another income added to your current income.

No, it is based on which rate band your normal income, excluding the lump sum, falls in.

If you are already an additional rate payer then it would be 45% on the whole of the lump sum.

Do you envisage that changing in the near future?  As it doubtless a very large lump sum even just a drop to 40% might be a worthwhile saving.

The links @xylophone provided will have good explanations.

BJ123

As an Expat , I am in a country where there would be no annual increase on the UK pension once claimed.   As I understand, a pension deferrment would also allow for the annual increases based on the triple lock (minimum 2.5% per year) until the date when the pension is claimed.