How is your state pension worked out if you defer it.

Like sf101 we were advised not to defer as the future could be unpredictable. A friend deferred his and sadly died before he claimed and his widow was unable to claim on his pension as she had paid full stamp and receives a full State Pension in her own right. So his contribution just went back into the general pot.

Before I took my pension, I rang the Pension service regarding the above. It’s alright to defer if, if you’re confident you’re going to live long enough. So I took mine.

I deferred my pension for a year under the old scheme. OK it is a gamble, but I have now lived long enough to know it was worthwhile taking it as extra pension.

Thank you for answering my question Retired65 .
There are now many options regarding taking pensions :
age that you take them, take a lump sum? drawdowns or annuities?

It’s so important as you do worry as you get close to retirement if you will have enough to live comfortably.
Maybe it should be taught to older students in education before they start work?

sf101, although I appreciate you sharing what the financial advisor said, I disagree with it.
Although there is a certain amount of gambling involved, if you go under a bus, your estate gets the lump sum, and you can claim at any time, so you don't risk 'losing' it.
Of course it wouldn't make sense to impoverish yourself today in the hope of a small increase tomorrow, but if you are working, or have other reasons not to need your State Pension immediately, it can make sense to defer for awhile.

I am a bit wary of financial advisors - of course many are sensible and helpful. For historical reasons, we had 2 advice sessions when we retired, and I was able to show them both that they had miscalculated on my pension - so I took my own (and Martin Lewis') advice instead, and have been proved right!

Riverwalk

Is that a typo, or have your really not claimed your pension since 2011?

Correct Riverwalk, I have not claimed my state pension since 2011. The reason for this is at present I still work part time and don't need the money. I work in a school so I get school holidays.

No savings account, was at the time paying much interest so I decided to defer. I rather have the extra money paid with my state pension when I do claim it. I worry about having enough money to live comfortable on when I do retire.

Petera

If you get a forecast (very easy to do online) does it not take this into account? (or maybe you're just interested in how it is calculated)

Unfortunately I cannot get a forecast for my state pension because I am past retirement age.

TillyTrotter

If you defer for 5 years will tax be deducted if you then chose to take the accrued lump sum?

Yes if you take the accrued lump sum, tax will be applied.

Lump sum payment
You can get a one-off lump sum payment if you defer claiming your State Pension for at least 12 months in a row. This will include interest of 2% above the Bank of England base rate.

You’ll be taxed at your current rate on your lump sum payment. For example, if you’re a basic rate taxpayer your lump sum will be taxed at 20%.

Fleur20

State Pension increases by 1% every 9 weeks it is deferred.. approx. 5.8% per 52 weeks/ a year.
So your pension in 2011 would be value A
2012 A + 5.8% = B
2013 B + 5.8% = C
2014 C + 5.8% = D
...and so forth..

Hope that helps...

Thank you Fleur for this.
I would like to point out though, that the 5.8% applies to those who were, if your a man born on or after 6 April 1951 or
a woman born on or after 6 April 1953.

For those born before the above dates the old state pensions rules apply which entails you to the following.
Your State Pension increases by the equivalent of 1% for every 5 weeks you defer. This works out as 10.4% for every 52 weeks.

Pepper59

I won't be deferring mine( when the time comes). That is if I live long enough to get it. Since the goal posts keep getting moved, I will just claim as I become eligible. If you are still working that may make a difference though.

No, as far as I can see it was worth doing about 5 or so years ago, but isn't anymore.

At a retirement course I attended whilst still at work, the financial advisor said never delay taking any pension. The years it takes for you to recoup what you have given up are very long and no one knows how long they have left.

I won't be deferring mine( when the time comes). That is if I live long enough to get it. Since the goal posts keep getting moved, I will just claim as I become eligible. If you are still working that may make a difference though.

If you defer for 5 years will tax be deducted if you then chose to take the accrued lump sum?

You can also take it as a lump sum. You need to look at the relevant section on gov.uk - there is a calculator - useful as women's State Pension age has changed
What they can't take into account is the age at which you might die - so DH and I made a guess and did the calculations on that!
I think there is a section in MSE on this - always worth looking at.
Just FYI - if you have deferred your State Pension but die before claiming it, your estate is credited with the equivalent lump sum, but of course the pension itself dies with you.

If you get a forecast (very easy to do online) does it not take this into account? (or maybe you're just interested in how it is calculated)

Is that a typo, or have your really not claimed your pension since 2011?

State Pension increases by 1% every 9 weeks it is deferred.. approx. 5.8% per 52 weeks/ a year.
So your pension in 2011 would be value A
2012 A + 5.8% = B
2013 B + 5.8% = C
2014 C + 5.8% = D
...and so forth..

Hope that helps...