Should I defer taking my state pension until after financial year 2024 ends?

EthicsGradient

HappyHarry said:

Perhaps drawing the state pension in October and putting the proceeds in a personal pension to benefit from the tax relief would make drawing it now seem more attractive?

While that's a good idea, if "other savings interest income" is £11,000, that indicates they are not short of cash to put £2,880 per year in whether or not they start taking the state pension.

6022tivo

I do hope a future government clamps down on Tax avoidance. 

HUMBUG

Dazed_and_C0nfused said:

But deferral of state pension for 6 months works out at an increase of about 5.2% per year.  

Therefore for year 25/26 my pension will increase by £11200 x 5.2% = 582.4 pa. 

Bit confused by this. 

It's actually 5.8% but if you are deferring for 6 months wouldn't your increase be more like 2.9%?  So an extra ~£325 rather than £582.40.

https://www.gov.uk/deferring-state-pension/what-you-get

I've read the following but I now suspect you are correct using the gov.uk site.

https://www.nidirect.gov.uk/articles/deferring-state-pension-and-what-you-will-get#:~:text=least%20five%20weeks.-,Your%20State%20Pension%20increases%20by%20the%20equivalent%20of%20one%20per,your%20regular%20State%20Pension%20payment.

"Your State Pension increases by the equivalent of one per cent for every five weeks you defer. This works out as 10.4 per cent for every 52 weeks. The extra amount is paid with your regular State Pension payment."

HUMBUG

Many thanks everyone for your detailed advice and help.

Just goes to show there are some very savvy people on MSE Forum.

Many thanks again.

EthicsGradient

HUMBUG said:

Dazed_and_C0nfused said:

But deferral of state pension for 6 months works out at an increase of about 5.2% per year.  

Therefore for year 25/26 my pension will increase by £11200 x 5.2% = 582.4 pa. 

Bit confused by this. 

It's actually 5.8% but if you are deferring for 6 months wouldn't your increase be more like 2.9%?  So an extra ~£325 rather than £582.40.

https://www.gov.uk/deferring-state-pension/what-you-get

I've read the following but I now suspect you are correct using the gov.uk site.

https://www.nidirect.gov.uk/articles/deferring-state-pension-and-what-you-will-get#:~:text=least%20five%20weeks.-,Your%20State%20Pension%20increases%20by%20the%20equivalent%20of%20one%20per,your%20regular%20State%20Pension%20payment.

"Your State Pension increases by the equivalent of one per cent for every five weeks you defer. This works out as 10.4 per cent for every 52 weeks. The extra amount is paid with your regular State Pension payment."

I think that was for if you reached pension age before 2016 - they've formatted the paragraphs badly. If you scroll up a bit, there's a paragraph titled "Reaching State Pension age on or after 6 April 2016" which has the 1% for 9 weeks figure.

HUMBUG

xylophone said:

Other savings interest income = £11000

Outside ISA?

https://www.gov.uk/apply-tax-free-interest-on-savings

You need to register for Self Assessment if your income from savings and investments is over £10,000. Check if you need to send a tax return if you’re not sure.

Yes, I will need to apply for a Self-Assessment form for year 24/25 .   So is this £10,000 only for non ISA savings/investment income?

It's strange that HMRC ask for this as I thought all banks/building societies send them details of 'savings interest' on people's bank/building society accounts. 

Thanks for the link as I've just registered now (apparently the deadline for doing so is this October).

HUMBUG

EthicsGradient said:

HappyHarry said:

Perhaps drawing the state pension in October and putting the proceeds in a personal pension to benefit from the tax relief would make drawing it now seem more attractive?

While that's a good idea, if "other savings interest income" is £11,000, that indicates they are not short of cash to put £2,880 per year in whether or not they start taking the state pension.

I have been putting in £2880  into a SIPP every year since I took early retirement from my previous job.

HUMBUG

6022tivo said:

I do hope a future government clamps down on Tax avoidance. 

I haven't been avoiding tax if that is what you are insinuating.

HUMBUG

EthicsGradient said:

I think, working Dazed_and_C0nfused's and pafpcg's comments into the calculation, it continues:

"But deferral of state pension for about 6 months works out at an increase of 3% per year (27 weeks from 1 Oct to new tax year, 1% increase per 9 weeks)

Therefore for year 25/26  my gross state pension will increase  by £11200 x 3% = 336 pa; which will all be taxed at 20%, so net increase = 0.8*336 = £268.80 (you might add on 2.5% for the minimum "triple lock" increase by the new tax year, so £275.52).

For me to make up that loss of £3553 less income I would have to live for £3554/275.52 =12.9 yrs approx."

Many many thanks for taking the time to correct my inaccuracies. 

zagfles

HUMBUG said:

6022tivo said:

I do hope a future government clamps down on Tax avoidance. 

I haven't been avoiding tax if that is what you are insinuating.

But maybe you should do! Paying tax on savings interest is easily avoided, or minimised, eg using ISAs, premium bonds, and when those are filled, low coupon gilts where you make minimal interest but get a capital gain, and no tax on capital gain from gilts. (that's raw gilts, not gilt funds).