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Due to receive my pension
David_the_coach
Posts: 1 Newbie
I’m due to start and receive my pension state next month. I don’t need to draw it but also don’t want to defer it either. What is the best savings plan with easy access to put my monthly state pension into please
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Comments
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..the best savings plan for your money if you don't need it IS to defer it....."It's everybody's fault but mine...."0
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Have a look at the 'banking and savings' tab at the top of this page for MSE's recommendations.0
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How much will your state pension be?
You might consider contributing to a personal pension using as much as possible of the state pension - even if you have no relevant earnings, up to age 75 you could contribute up to £2880 to a personal pension and receive tax relief of £720.
Savings accounts listed here
http://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html0 -
If you don't need it then presumably you have other income. So... Take your state pension & pay at least 20% tax on in & stick it into a savings account at a derisory 2%. Or defer it at 5.8% uplift per year (worked on a weekly basis) & it pays that out for life. Provided you have a reasonable life expectancy this is a very good deal. What is your rationale re not wanting to defer?0
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Or defer it at 5.8% uplift per year (worked on a weekly basis) & it pays that out for life. Provided you have a reasonable life expectancy this is a very good deal. What is your rationale re not wanting to defer?
But if you have (say) 25 years to live, deferring your pension for a year costs you 4% of your total pension payment over the rest of your life.
5.8% - 4% = less than I get on a Cash ISA.
5.8% - 4% = less than the 6.25% boost I get by contributing £2,880 net to a SIPP.
Maybe in the OP's shoes I'd defer for a year, whereas with the old-style pension five years or so might have been a reasonable deferral. Still, at least deferring is cheap insurance against runaway inflation: better than buying index-linked gilts anyway.Free the dunston one next time too.0 -
!!!8220; Or defer it at 5.8% uplift per year (worked on a weekly basis) & it pays that out for life. Provided you have a reasonable life expectancy this is a very good deal. What is your rationale re not wanting to defer?
Originally posted by badmemory
It isn't that good a deal.
We looked at deferring Mr S's State pension, but decided to take it and save it instead.
In round figures, deferring for one year =
State pension £7,900
Plus 5.8% = £8,358 (increase of £458 per year)
GAINS
Extra £458 over possible 20 years = £9,160 (plus index linked annual increases)
LOSSES
£7,900 first years pension (plus savings interest)0 -
I agree as I don't see the point in the OP deferring it year after year to uplift it by 5.8% each year as it would take many years to make up the shortfall by not taking it. Surely it is better just to take it and save it, invest it, or even spend some of it!Silvertabby wrote: »It isn't that good a deal.
We looked at deferring Mr S's State pension, but decided to take it and save it instead.
In round figures, deferring for one year =
State pension £7,900
Plus 5.8% = £8,358 (increase of £458 per year)
GAINS
Extra £458 over possible 20 years = £9,160 (plus index linked annual increases)
LOSSES
£7,900 first years pension (plus savings interest)0 -
Under the old system, deferring was definitely worth considering, but I suspect the govt baulked at the cost of the same level of uplift with the new state pension. However, in doing so they have effectively removed any real incentive for deferring in the first place....
The "big" risk with deferring is of course the risk of dying before your break-even date, which, depending on inflation and interest rates etc, is now likely to be sometime in your 80s......and given that you may have alternatives paying the same or better than deferring, which don't have this risk......
Of course, there could still be perfectly valid reasons for deferring, such as income tax concerns etc....so it can still be useful......just not as useful as it once was!
For some, the ease with which you can defer (ie by simply not claiming your SP) will also be attractive....definitely a hassle free option.0 -
Under the old system, deferring was definitely worth considering, but I suspect the govt baulked at the cost of the same level of uplift with the new state pension. However, in doing so they have effectively removed any real incentive for deferring in the first place....
The "big" risk with deferring is of course the risk of dying before your break-even date, which, depending on inflation and interest rates etc, is now likely to be sometime in your 80s......and given that you may have alternatives paying the same or better than deferring, which don't have this risk......
Of course, there could still be perfectly valid reasons for deferring, such as income tax concerns etc....so it can still be useful......just not as useful as it once was!
For some, the ease with which you can defer (ie by simply not claiming your SP) will also be attractive....definitely a hassle free option.
In Mr S's case he will pay 20% tax either way, which was part of our decision not to defer.0
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