To defer State Pension or not ?

Telstra2017

Newbie here!
Rather than start a new thread I thought I would post on this one and hope I get a reply
My state retirement age (66)  is June this year
Pension will be £231.20 pw £12063.69 pa
I am working and earning £45k pa
If I take my pension I will move into the next (40%) tax bracket for everything over £50K
I have a contract of employment until I am 68

I will have a small work place pension with a pot of about £50K
If I defer for two years do I get a 11.6% uplift?

My health is OK but I have two chronic diseases (Diabetes and COPD) which do not make me that confident of making my 90s for instance!



Really not sure what to 

Dazed_and_C0nfused

Telstra2017 said:

Newbie here!
Rather than start a new thread I thought I would post on this one and hope I get a reply
My state retirement age (66)  is June this year
Pension will be £231.20 pw £12063.69 pa
I am working and earning £45k pa
If I take my pension I will move into the next (40%) tax bracket for everything over £50K
I have a contract of employment until I am 68

I will have a small work place pension with a pot of about £50K
If I defer for two years do I get a 11.6% uplift?

My health is OK but I have two chronic diseases (Diabetes and COPD) which do not make me that confident of making my 90s for instance!



Really not sure what to 

It's based on 9 weeks periods but you are about right.

Another option is to take the State Pension and make some additional contributions to a personal pension or SIPP (which can be inherited). 

This would benefit from basic rate tax relief being added by the pension company i.e. you hand over £1,000 and end up with £1,250 in your pension fund.

The gross contribution also has the benefit of increasing your basic rate band so you would pay more tax at 20% and less at 40%.

Additional contributions to your workplace pension may achieve the same outcome, although not necessarily following the same methodology.

Grandadtiger

Oops
I deferred my state pension but just realised I can't pass on to heirs. I believe the lump sum is taxed at current rate.This year will probably be nil so I plan to take it March next year. Any other ideas ?

xylophone

I would be inclined to take the SP at SPA, regard it as income replacement and pay as much as possible from salary into workplace/other  pension (s).

pinnks

Grandadtiger said:

Oops
I deferred my state pension but just realised I can't pass on to heirs. I believe the lump sum is taxed at current rate.This year will probably be nil so I plan to take it March next year. Any other ideas ?

Unless you reached pension age before 6 April 2016, there is no lump sum.  If you have been deferring for the last 9 years, or so, then the lump sum is taxed at the tax rate that applies to you, absent the lump sum.  If you can engineer a year where other income is below the personal allowance, the lump sum would be tax free.

Linton

The 5.8% deferral benefit is pretty marginal.  You could just as well take the full term and invest the years you would have deferred.  You would win out if you died early.

Dazed_and_C0nfused

Grandadtiger said:

Oops
I deferred my state pension but just realised I can't pass on to heirs. I believe the lump sum is taxed at current rate.This year will probably be nil so I plan to take it March next year. Any other ideas ?

Unless you deferred it prior to 6 April 2016 you cannot get a State Pension deferral lump sum.

You can backdate your application by 12 months and that will result in a one off payment of the pension due for the last 12 months but this will be taxed as normal, in the tax year it relates to at whatever your marginal rate is.

But that would probably be an odd way of approaching it as you would be giving up the benefit of deferring for that 12 month period.

MarzipanCrumble

I am on the old SP and I deferred for about 5 years and worked in a DB pension situation above retirement age. 

Why did I do this?  Because I wanted a really secure income that inflation spikes, increases in out goings, repairs to house/car/other, care, services for which I pay, other sundry expenses, would not cause me stress.  I really did not care that I would have to live to 120 to outgain the loss of not taking SP at alloted time but deferring.  I wanted to have enough to not budget and not worry if the roof needed mending.

Yes, I am in a higher income tax bracket - so what?  I can give regular income to my kids (documented re IHT) which I can stop at any time if necessary.  Note SP is not my only income.  DB pensions make up the rest which leaves me in an enviable position, I think.

Horses for courses - what are your priorities?  Mine is having more than enough to live a really comfortable life and not be stressed.

prowla

Interesting; I don't see any particular gain in deferring then.

That said, I've no plans to retire, so the state pension would just be some extra money coming in.

LHW99

I could see a point if you were single, with only a smallish DC pot, and wanted to increase your index linked income. It would take away some of the worry about coping with large drops in the market.