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Pension advice please

Community Veteran
Posts: 7,149
Thanks: 51
Fixes: 2
Registered: 30-08-2007

Pension advice please

In February this year I reach that 65 milestone and become a recipient of a state pension (such as it is) As I am not planning to stop working just yet, I am considering deferring the pension for some while. The 5 year contract I'm currently working on will be up for renewal in 2014 I would consider that an auspicious time to call it a day -providing I can continue to pass the medical requirements for my bus/coach licence which after 65 becomes annual rather than every 5 years-
Any retired members out there have any advice about deferment or not doing so? I know deferring will result in a 10.4% per annum (or 0.2% weekly) increase in the pension (or a rather paltry lump sum) but is it worth taking into account the amount lost by not taking the basic pension at 65.
I'm not unaware that this year a heck of a lot of "baby boomers" reach 65, there really are a lot of us around. And wonder if our (apparently) cash-strapped government might just be planning to change some pension rules.
One other snippet for anyone else reaching 65 this year, you don't have to pay National Insurance any more, but you need to apply for an Exemption Certificate for your employer if you are carrying on working see booklet BR33 04/10 (page 15)
Experience; is something you gain, just after you needed it most.

When faced with two choices, simply toss a coin. It works not because it settles the question for you. But because in that brief moment while the coin is in the air. You suddenly know what you are hoping for.
32 REPLIES
Community Veteran
Posts: 18,544
Thanks: 190
Registered: 12-08-2007

Re: Pension advice please

I guess you will have read this but it's worth a look:
Pension Deferral
pierre_pierre
Grafter
Posts: 19,757
Registered: 30-07-2007

Re: Pension advice please

some thing wrong with your link, seems to be send an e-mail
Community Veteran
Posts: 18,544
Thanks: 190
Registered: 12-08-2007

Re: Pension advice please

The link should have been:
Pension Deferral
I looked at deferring my State Pension but decided against it.
nadger
Rising Star
Posts: 4,498
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Registered: 13-04-2007

Re: Pension advice please

I carried on working until I was past my 70th birthday but decided not to defer my state pension.
SWMBO is nearly 10 years younger than me so didn't receive her state pension until I was nearly 70. As I ran my little courier service as a partnership ( with her) it didn't work out too badly tax wise.
One thing that should be considered is that one will be taxed on the additional income, if one doesn't defer, so look at that area.
It's a good point regarding National Insurance as I've seen a couple of people fail to do that until I told them about it. As I was self employed it meant that I stopped my stamp but was still liable for Class 4 contributions until the end of the tax year in which I was 65.
johpal
Grafter
Posts: 550
Registered: 20-04-2008

Re: Pension advice please

Deferring any pension is something of a gamble and depends largely on your personal circumstances and your view on risk. You have no guarantee that you will survive long enough to "make it worth your while". Furthermore, with the likes of the present bunch of [Self Censored] in Government, the "goal posts" could be shifted at any time, to your detriment.
I am not a financial advisor, but my personal philosophy is "Take the money and run!"
pierre_pierre
Grafter
Posts: 19,757
Registered: 30-07-2007

Re: Pension advice please

I was one of the lucky one took a special early retirement after 43 years, thought I would have to pay NI, but no they said I had enough, and I wasnt 60.  We had the option of several deferement options for a final salery pension, I took an immediate with bumped up to include the eqivelant of the state until I reached 65.  Also got a very plump sum as a form of redundecy - voluntary type
nadger
Rising Star
Posts: 4,498
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Registered: 13-04-2007

Re: Pension advice please

Not many people, if any, will be able to do that in the future.
Community Veteran
Posts: 7,910
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Registered: 02-08-2007

Re: Pension advice please

Not sure if this is correct but I seem to recall that when the government increased the state pension a few years ago the percentage it increased by did not apply to anything other than the basic pension, in other words no increase in the percentage of serps or deferred pension element.
Anyone looking to defer their pension really needs to do a lot of research before making a decision.
Likewise the number of years you have to pay for a full pension.......I think it's 40 years for men, the point there is that many people work 50 years or more yet are still required to continue to pay contributions even though they have enough and to make it more confusing some people could retire at 60 and would be credited with a further 5 years contributions for nothing !
Much of the above is now out of date or soon will be but the main problem is that the Government keep changing the Goal posts on pensions and there are proposals to pay pensions on the length of time a person has spent in the country rather than the contributions they have made. So we could have a bizarre situation where someone with 30 years contributions could get less than someone else who has made no contributions.
What a B........ Minefield !!
Community Veteran
Posts: 18,544
Thanks: 190
Registered: 12-08-2007

Re: Pension advice please

You're right, increases apply only to the basic pension figure and not other items such as serps etc.
Community Veteran
Posts: 38,244
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Registered: 15-06-2007

Re: Pension advice please

i deferred mine with the intention of taking a lump sum payment and then the normal pension http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/StatePensiondeferral/DG_17999...
Quote
How much you will get
If you choose to put off claiming your State Pension for at least 12 consecutive months you can get a one-off lump sum payment instead. This will be in addition to your normal State Pension. The 12 consecutive months must all have fallen after 5 April 2005.
When claiming your payment, it will be based on the amount of normal weekly State Pension you would have received, plus weekly interest added and compounded.

http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/Basicstatepension/DG_10026707
Quote
Putting off claiming your State Pension
When you reach State Pension age, you may choose to put off claiming your State Pension.
If you put off claiming your State Pension in this way, you can choose to get either:
    * extra State Pension when you start to claim it (around 10.4 per cent extra for every year you put off claiming it) or
    * a lump-sum payment (based on the amount you put off claiming, plus interest at two per cent above the Bank of England base rate)
Quote
If you die before starting to claim the State Pension you have put off claiming
Your extra State Pension may be added to your spouse's or civil partner's State Pension. If you get an additional State Pension, they can still inherit some of this – usually around half.
From 6 April 2010, you may inherit extra State Pension or a lump sum payment from your spouse or civil partner. But only if either of the following applies:
    * you are a surviving husband or a surviving civil partner and you reach State Pension age on or after 6 April 2010
    * you are a surviving wife
The above will not apply if you re-marry or register again as a civil partner before reaching State Pension age.
Before 6 April 2010 only wives could inherit extra State Pension or a lump sum if they were widowed before they reached State Pension age. Husbands and civil partners had to be State Pension age or over when widowed.

Note that the interest is on the gross amount whereas if you take the pension and invest it then the interest will be on the after tax amount.

Community Veteran
Posts: 7,149
Thanks: 51
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Registered: 30-08-2007

Re: Pension advice please

Well this seems to have stirred up a small can of worms...
My grateful thanks for all who have responded, however, I haven't yet decided what to do but, I'm gently leaning towards deferral, some of the reasons are as follows:
If I don't survive long enough to enjoy the fruits of any decision is hardly likely to worry me much. SWMBO would not benefit from this as, when she started work opted to pay full rate class 1 NI, she is in receipt of a full rate Disabled Living Allowance (not withstanding there is much going on with this at the moment, including suggestions that European law may be breeched if any detrimental changes are made to that (about the only time I've ever applauded interference from Brussels)
At this time I don't actually need the money, providing I continue to have a small employment income. This could change pretty quickly if I was unable to work.
Following a conversation with a representative at the DWP I can change my mind at any time. I can opt for deferment, at one minute past midnight the day after my 65th birthday I can claim the standard state pension. (but only once, as soon as the pension becomes payable to me whether deferred or standard I ( or anyone else) cannot change their mind. In other words this is a one-off one time only choice.
One aside is that, in spite of making contributions for 50 years (yes I'm one of those) you have to apply for the state pension, you might have thought it would be automatic.
Experience; is something you gain, just after you needed it most.

When faced with two choices, simply toss a coin. It works not because it settles the question for you. But because in that brief moment while the coin is in the air. You suddenly know what you are hoping for.
nadger
Rising Star
Posts: 4,498
Thanks: 46
Registered: 13-04-2007

Re: Pension advice please

Quote from: Petlew
you have to apply for the state pension, you might have thought it would be automatic.
I'd mistakenly assumed that - seems one should receive application paperwork about 3 months before one retires and mine hadn't been sent out.
Fortunately someone, who just retired, told me in time so I got paperwork, completed it and took it to benefits office in Luton which was an eye opener  with people screaming and shouting at the staff - not me I hasten to add  Wink
As I'd elected to receive payments 4 weeks in arrears I did actually get first payment on time albeit incorrect.
Community Veteran
Posts: 3,826
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Registered: 24-09-2008

Re: Pension advice please

I deferred mine and have been making a decision each year on wether to continue to defer it or not.
As I understand each year I defer claiming I receive an increase of 10.4% on basic state pension.
I'm still self employed and would pay tax at Basic rate on my state pension (if I drew it). I appraise the situation at the end of each tax year. When I drop below a certain earnings figure I'll elect to draw my state pension. (I don't specifically want to pay more tax than is necessary) Roll eyes
There are two downsides to this (as I see it).
1) If I 'shuffle off' SWMBO gets very little help from the state, any pension is basically lost until SWMBO reaches pensionable age.
2) DO I trust this government not to make any changes to this arrangement.

Community Veteran
Posts: 7,149
Thanks: 51
Fixes: 2
Registered: 30-08-2007

Re: Pension advice please

Well I think I've come to a decision. While I quite like the idea of receiving £130+ weekly in 3 years by deferring my pension, I am also considering the loss of £15,200+ over 3 years (at the approximate pension levels today) by not claiming the pension at 65.
So since as previously mentioned I don't need the money at this time. I'm thinking of having the whole pension paid into an existing but largely unused and mainly empty online ISA account as a welcome extra nest-egg for when I do choose to stop work.
I realise there are rules around ISA's that limit the amount that can be invested annually, but if it is only the pension going into it I don't think that will be a problem. It also has the advantage of instant access if required.
I take it there are no silly DWP rules that limit what kind of account a pension is paid into.
My thanks to all who responded.
Experience; is something you gain, just after you needed it most.

When faced with two choices, simply toss a coin. It works not because it settles the question for you. But because in that brief moment while the coin is in the air. You suddenly know what you are hoping for.