Topic: | Re:Taking my State Pension - help please ! | |
Posted by: | Phil Kay | |
Date/Time: | 08/05/15 18:00:00 |
Maggie - doing the numbers is not too difficult, depending on whether your income is likely to change much over the next 1 to 5 years. If you are a basic rate tax payer (20%) and taking your pension will not push you into the higher rate (applied to annual earnings of £31,786 or more), then you can easily work out how much additional tax you will need to pay. Since you are already using your full tax allowance, you will pay 20% of your pension as tax. National Insurance is not deducted from those of state pension age. If you choose to take a lump sum, you would pay 20% tax on that amount plus normal earnings up to £31,785, and 40% on the rest. If you do these sums for each of the next 5 years, you will see when it makes the most sense to take your pension. I believe 5 years is the longest period for which a state pension can be deferred. This can then be compared to how much you would have received and been taxed over the 1 to 5 years if you defer the pension. I did the calculations for my Uncle a few years ago, which showed that he would have to live until at least the age of 78 to make the deferral worthwhile, in simple money terms. He decided to take the money and lived to 92. I'm sure there's no link though. |