State pension - now I must choose.

chesky369

Decisions, decisions…..
Having deferred taking my state pension for 2.5 years, I now have to decide whether to take the lump sum or the increased weekly payment.

Lump sum approx. £11,700 after tax which would give about £550 p.a. interest or £10.50 per week.
Increased payment of £28.85p per week – approx. £23 after tax or £1,200 p.a.

What would others do?

EdInvestor

How are you off generally for cash/other assets?Better to take the extra pension if you don't really need more, because of the valuable index linking.

Other things to consider are whether you have heirs to leave money to and how young you think you will live, sorry to be morbid

chesky369

no, don't mind morbid, I'm feeling healthy today. My house is paid for; I have other pensions totalling £16k (pre-tax); also ISAs savings etc. £100k give-or-take so I'm not destitute. Explain index linking please because I think I'm probably in the worst position - income £21k-ish.

EdInvestor

I just mean the state pension is index-linked for inflation - and guaranteed of course.

I guess you're not yet 65?At that point your tax age allowance starts getting withdrawn if your income goes over around 21k.However you can always build up maxi ISA savings (start now!) and/or use N&SI index linked certs to reduce the taxable amount.

With 100k in accessible savings, I'd go for the extra pension as the lump is too small to have much impact and long term the pension will be better value. I'd say the opposite for someone who had savings under 40-50k.

[BTW if you had to buy that income of 1,200 a year index linked with 100% spouse's pension, it would cost you about 40k as an annuity. The state pension really is a bargain ]

chesky369

thanks ed - agree about the bargain - wish I'd managed more of them, instead of being incredibly stupid when I married at 18 and paid the married womens' rate, because the nice lady in the accounts office said it was what 'everybody does, dear'. My own fault, nobody else's. But definitely one of those dumb things.