| Topic: | Re:Re:Re:Re:Re:Re:Re:Re:Re:Re:Deferring your state pension | |
| Posted by: | Joe Conneely | |
| Date/Time: | 23/05/15 17:43:00 |
| In relation to your original enquiry, I had to look at this personally in my own case recently. The following are the conclusions I reached (I assume you will be entitled to your state pension before 6 April 2016 when the rules change again): 1. The current rate of "notional interest" or uplift on the pension is a very attractive rate at around 10.4% per year of your starting pension (the rate drops dramatically by 50%+ for people reaching retirement age after April 2016 plus loss of the lump sum option it seems). 2. If as you plan you take the lump sum after 1 year and then start taking your state pension, you will be taxed on this sum as normal income (it will be slightly increased by a small sum of interest). 3. If you were instead going to start at 65 and put your weekly pension from 65 into a cash interest paying ISA even though receiving tax free interest I doubt you would get anything like the 10.4% government rate, even after deducting any tax payable in a year's time (assuming you are a normal basic rate tax payer). 4. Worst option I concluded is to defer for the year and then take the "uplift" of 10.4% as additional pension for the rest of your life - my rough calculations as confirmed by the DWP booklet on Deferring your State Pension, show you will need to live till 76/77 years of age to fully recoup the one year deferral of not taking your pension to receive this uplift across later years! 5. Small bit of good news is if you carry on working after 65 years as you indicated, at least you should be exempt from any further NI contribution deductions |