Defer State Pension?

[medsecslave]

Hello I'll be getting my state pension in August but am considering deferring it as I am still working part time and it will be taxed.  Would I be better off taking it and putting it into an ISA or deferring it ? Thank you

[barry1010]

Difficult to answer.  You need to work out how much tax you will be paying and how much interest your pension would earn in an ISA.  Have you taken advantage of the £1000 tax free interest allowance on savings?  If not, an ISA might not be the right savings account at this time

[barry1010]

Forgot to add, you need to know how much your pension will increase by if you defer it.  

Get all the facts down on paper and it should be clearer

[Hopkirk]

Also consider any beneficiaries of your estate should you die.

If you defer, you get more when you take the pension but it stops on death.

If you take it now and save it, your family get they saved money.

[medsecslave]

I take home approximately £1,350 per month plus £579 NHS pension because I did retire and return.  The state pension will be £888 per month.  If I defer I gain an extra £40 per month on the pension.  I'm kind of thinking about the ISA option ?

[barry1010]

This might help

"

For every 9 weeks you defer, you'll get an extra 1%, which is around an extra £2.20 a week.
 

If you defer for a full year, you get 5.8% extra, which is £12.83 a week.

On current figures, a one year deferral would net you an extra £667 a year on your state pension, for life. Yet, do note that to get this, you'll have given up £11,500 in state pension that you could have claimed in the first year. 

In general, if you defer for any amount of time, you'd need to live for around 20 years after taking your state pension to even out the amounts... which is around the time an average 66 year old is expected to live."

https://www.moneysavingexpert.com/savings/should-i-defer-my-state-pension/

[douglas9401]

Take the money and run, it's a rigged game anyway so enjoy the cash while you can.

[barry1010]

If you defer for a year you'll gain 5.8% extra pension for every year you live

If you don't, you'll lose around 17% in a year if you are a basic tax payer (20% to the tax man, 3% to you in interest*), more if you are a higher tax payer

*I've estimated the interest at 3% because if you will be saving your pension monthly, not as an £11k lump sum.

[ToraToraTora]

never defer a state pension, take the dosh and save it if you don't need it.

[bhg481]

If you defer for thetime being and claim it when you feel like giving up your job the pension will compensate for the loss of your earnings and avoid a big change in your monthly income. If you're planning on working for a few years I'd take the pension now and save it.

[Bazile]

If the state pension is taxable , is tax taken off before it's paid to you  if you're not working ?

[barry1010]

As he will be on the 'new' state pension it is not enough to qualify for income tax if he has no other income

[Peter Pedant]

dont ask us - ask which !

https://www.which.co.uk/money/pensions-and-retirement/state-pension/deferring-your-state-pension-aksco6V6rnhQ

basically you have to calculate the cross over point ( ahead  in years) - that is the year in which it was all worthwhile even tho there as a risk of aloss in earlier years ( and then you have to live to that year)

This is where Barry goes Baaaarp ! and deletes my post. My NHS pension - I  took a larger lump sum and smaller pension ( old rules) and and the cross over point, where it became a bad deal was - 20y

I thought it was never worth deferring the state pension - BUT the which article - tells you how to do it

You have given us your pension history, and even as a NHS pensioner the history made my brayne hurt. (( I took my pension 2012 and did diddly squat since then)

[Bazile]

If you're working for Joe bloggs and you have tax deducted from your earnings .

You then qualify for your SP , where is the tax taken for your SP - do you declare it separately to the inland inland  ?

[Peter Pedant]

Most answers are er flecting the recd wisdom  don't it is not worth it

interesting that the cross over oint of 20 ( where it becomes a good idea) is so frequently 20 y - 

have our great and good leaders factored in the number of people who reach 60 but dont reach 70? - ( it seems huge - muuch greater than 20%)

 

 

[ToraToraTora]

10:41, no it's done in a tax return.

[barry1010]

Bazille, your tax code would change to take in account the state pension and the tax would be paid from your salary.

[naomi24]

Peter Pedant, Barry would be within his rights to remove posts where you are rude -  which in your case is most of them.  If you don't want to get zapped grow up and find your manners.  If you don't mind getting zapped carry on as you are but don't say you didn't know.

[barry1010]

Thanks, Naomi, I hadn't noticed, I rarely read his posts.

Let's get back on topic 

[New Judge]

“If the state pension is taxable , is tax taken off before it's paid to you  if you're not working ?”

No. DWP doesn't have he ability to tax State Pensions (or to pay them calendar monthly instead of four-weekly).

If you have other income which takes you above the personal tax-free allowance of £12,570 in total, HMRC adjust your tax code so that tax due on all your income is collected from your extra income. Without a State Pension (or any other complications) everybody has a tax code of 1257, meaning they can have an income of £12,570 without paying tax. If they have a State Pension, their personal allowance is reduced by the annual value of that pension. So if they have a State Pension of £10,000, their tax free allowance becomes £2,570, and their tax code 257. This means they can only have other income of £2,570 before tax is due.