Deferring State Pension with interest rates a bit higher?
Discussion
I am pondering.
Both myself and my Manager who works for me are nearly at retirement age and will be eligable for the State Pension in the next year.
He came to me and said he was going to defer his pension as he has no intention of stopping work for at least another 5 years and so "would be better getting the increased amounts".
My view was that this would not neccesarily be the right things for him, can any of you tell me my logic is flawed:-
He is on 30K, the pension would not push him far into the 40% bracket, if he put the pension money straight in to a Cash ISA this would return over 4% and that would be tax free ans so the difference in actual earnings would not be significant. However as well as that he would have the knowledge that the pot built up in the ISA would then be available to his partner and kids should he die before the 20 year period that is cited for the break even point on deferring the pension?
To me it's as important that any money I'm entitled to is there for my beneficiaries rather than being left with the State.
A few years back with zero interest rates it made more of a difference but is that not the case now?
Have I missed something?
I have always paid myself the 20% limit and so after I'm 66 I will pay my wife whoi is well below, the same sum as the pension (she's a Director) and so that together with paying no NI will help my income.
Both myself and my Manager who works for me are nearly at retirement age and will be eligable for the State Pension in the next year.
He came to me and said he was going to defer his pension as he has no intention of stopping work for at least another 5 years and so "would be better getting the increased amounts".
My view was that this would not neccesarily be the right things for him, can any of you tell me my logic is flawed:-
He is on 30K, the pension would not push him far into the 40% bracket, if he put the pension money straight in to a Cash ISA this would return over 4% and that would be tax free ans so the difference in actual earnings would not be significant. However as well as that he would have the knowledge that the pot built up in the ISA would then be available to his partner and kids should he die before the 20 year period that is cited for the break even point on deferring the pension?
To me it's as important that any money I'm entitled to is there for my beneficiaries rather than being left with the State.
A few years back with zero interest rates it made more of a difference but is that not the case now?
Have I missed something?
I have always paid myself the 20% limit and so after I'm 66 I will pay my wife whoi is well below, the same sum as the pension (she's a Director) and so that together with paying no NI will help my income.
Its taxed coming out tho so he will lose that % in Tax and not recoup that via growth - so the 4% would more be more like -30% once you take tax off. If he defers presumably he will then be taxed at the rate of his retirement income rather than he current marginal rate.
That would bother me about drawing it now but I guess its not avoidable. Unless you can draw it down whilst offsetting current salary against a SIPP - cant remember whether a SIPP can be left to beneficiaries or not.
Someone wiser will advise better.
That would bother me about drawing it now but I guess its not avoidable. Unless you can draw it down whilst offsetting current salary against a SIPP - cant remember whether a SIPP can be left to beneficiaries or not.
Someone wiser will advise better.
If you defer, how many years do you need to live for to get that money back?
"You get £221.20 a week (the full new State Pension).
By deferring for 52 weeks, you’ll get an extra £12.82 a week (just under 5.8% of £221.20)."
So the pension is £221.20 a week, or £11,502.40 a year
£11,502.40/ £12.82 (the extra you will get per week) is 897 weeks, or 17.25 years before you get the money back.
Personally I would the pension now, a bird in the hand and all that.
"You get £221.20 a week (the full new State Pension).
By deferring for 52 weeks, you’ll get an extra £12.82 a week (just under 5.8% of £221.20)."
So the pension is £221.20 a week, or £11,502.40 a year
£11,502.40/ £12.82 (the extra you will get per week) is 897 weeks, or 17.25 years before you get the money back.
Personally I would the pension now, a bird in the hand and all that.
Yes I see what you mean, I had not factored the loss of 20% of the pension while it is paid to him above the tax threshold as he keeps working.
Still like the idea of cash in the hand rather than possible cash in the hand if you live long enough though.
I just need to work out exactly how long I'm going to live and I've cracked it!
Still like the idea of cash in the hand rather than possible cash in the hand if you live long enough though.
I just need to work out exactly how long I'm going to live and I've cracked it!
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