Defer State pension. Does anybody.?

QrizB

dealyboy said:

@Qrizb said:

njkmr said:

If this is correct who on earth thinks this is a good deal.?

It's a relatively cheap way of buying triple-locked pension income.

His £11k will buy him ~£620 a year of pension income.

The same £11k used to buy an RPI-linked annuity would only buy ~£500 a year.

... its not triple locked ... the "extra pension" from deferment increases with CPI (currently).

I knew that, apologies to everyone for forgetting when I was writing my reply!

(I've got a nasty cold and everything is proving more difficult than usual.)

dealyboy

Get well soon @QrizB ... 

p00hsticks

german_keeper said:

la531983 said:

You get an extra percent for every 9 weeks you defer. There is also an option just to claim the Pension up to 11 months late, if he does that he gets everything backdated and then continues at the usual £203 rate (or whatever it is when he claims) 

Does he think if he defers he gets a whole year backdated as well as an enhanced one going forward? It's either/or, also only 11 months deferment is allowed to get the lump sum iirc, which won't be subject to interest.

If he is choosing to defer and get the lump sum I am not entirely sure how this works for tax purposes, I. E. what year the income would fall in, someone else may know. 

What would be the point of not claiming for 11 months just to get a lump sum? Surely you would just claim it at SPA and stick it in a regular saver if you didn't need the money at the time.

One possibility is to avoid paying a higher rate of tax - if you are continuing to work, then claiming your state pension stragiht away alongside it may push you into a higher tax band, whereas if you give up work eleven months later in a new tax year and got a lump sum you may pay less tax. 

Dazed_and_C0nfused

la531983 said:

german_keeper said:

la531983 said:

You get an extra percent for every 9 weeks you defer. There is also an option just to claim the Pension up to 11 months late, if he does that he gets everything backdated and then continues at the usual £203 rate (or whatever it is when he claims) 

Does he think if he defers he gets a whole year backdated as well as an enhanced one going forward? It's either/or, also only 11 months deferment is allowed to get the lump sum iirc, which won't be subject to interest.

If he is choosing to defer and get the lump sum I am not entirely sure how this works for tax purposes, I. E. what year the income would fall in, someone else may know. 

What would be the point of not claiming for 11 months just to get a lump sum? Surely you would just claim it at SPA and stick it in a regular saver if you didn't need the money at the time.

I agree. But it's there as an option. Someone was on here the other week talking about doing it.

I have no idea though it doing that defers all the tax paid on it to the next tax year though. If it does maybe that's a consideration for people.

In that situation it's still taxable in the tax year it relates to so yes tax is paid later but is still based on the original year it relates to, not the year it's paid in.

Marginal gains (and possible interest charge if you complete a Self Assessment return) but will no doubt suit someone.

badmemory

Don't forget about the possible 40% tax on a large part of the state pension if taken whilst still working, so over £4k per year.  You need to factor in ALL costs & savings.  So even if it is all taxed after retirement it may well only be at 20% so £2k a year better off.

njkmr

Thanks guys, some good points made there. I will show him the comments so he can decide for himself.
For me it would be a no no. But that's a personal perspective and appreciate the feedback.
Regards
Rob.

swindiff

If I were in that position I would take the state pension and increase paying into my work pension by that amount therefore not paying any higher rate tax.  Even better if work pension offers salary sacrifice.

LHW99

If his immediate family is long-lived, he may have a good chance of living longer than the average, in which case the deal will be on the better side of fair (or the opposite of course)

atush

My OH deferred for a year as was still working.  He will start taking it next tax year