bigglesworth

Someone else has made the point, as have I, that it gives you an effective return of 5.8 percent against about 3.3 in the market. And it is index linked. so on the face of it, yes a good idea.

My objection is simply that Governments have changed the rules so often that I have no faith they won't do the same again.

Giantaxe

If you have a stroke, your costs probably go up. So you might be grateful of that deferral.

My point is that if you can maintain your lifestyle by spending other savings first, then it makes sense to defer as it reduces the risk of outliving your money. So I actually view this as the inverse to you:- if you're in dire straits then it makes no sense to defer as you likely need pension income now, not a few years down the road.

Editha

I absolutely agree.

Editha

I strongly suspect that the 'pensioner's top up' is a case of government giving with one hand and taking away with the other.

Having discovered that the uplift for deferral has been halved for the new single tier pensions, I think it very likely that by the time I get to retirement age in March next year, the uplift for deferral will have been halved for old-style pensions too, which will mean there is not much to choose between deferral and paying for the top up.

Nevertheless, deferral will still be the preferable option in my opinion, because money in the bank is money in the bank earning interest, however little, and I'd rather spend it gradually to enable me to defer taking the state pension, than give it all to the government in one lump sum.

dunroving

Just to clarify what I said about the current best-buy annuity market rates:

About 6% for a non index-linked annuity and about 3.5% for an index-linked annuity.

dunroving

I think it is also the current government figuring out ways to get people to take responsibility for their finances in retirement (although interestingly, this initiative is almost the opposite of the "You can cash in your pension" move in the recent budget).

Giantaxe

That can also be seen as encouraging people to take responsibility for their own finances. Instead of "you can cash in your pension", I see it more as "you're no longer forced to invest your pension in one particular type of financial product" and now have choices as to what you do.

Editha

I remember when 'encouraging us to take responsibility for our own finances' meant encouraging us to invest in private pension funds, which in many cases have turned out to be poor investments. I say this with all the bitterness of an Equitable Life policy holder.

Ironically, the recent reform is likely to result in more pensioners looking to increase their government funded benefits. By my own calculation, if you've decided to take the cash from your pension fund instead of buying an annuity your best bet for a profitable return is:

a) To put solar panels on your roof, thereby profiting from the government subsidized 'feed-in tariff', producing a return of around 13.5%.

b) Using the cash to subsidize a deferral of your state pension, currently offering a return of 10.4%.

c) To take advantage of the government 'pension-top up offer' with a return of 5.8%.

People with larger funds will also be looking at buy-to-let, but the average size fund is £25,000 and for those people the government subsidized options look like the best on offer.

dunroving

For "private pension funds", I substitute a) endowment policies, b) stocks and shares in the late 1990s, and c) property in the late 1980s and mid-2000s. All manipulated by the financial sector for their own ends and all to varying degrees ending in tears for the "responsible" public. It's difficult not to be cynical.

rebs

Options b & c are not available to everyone ....

b - only an option for those that have not yet claimed their pension, but are due to claim prior to April 2016. Post April 2016 the uplift will be reduced (possibly halved), so a different calculation.

c. Again, not available to those due to reach state pension age after April 2016 (but those already claiming pension can do this).

Another option to consider could be to claim the state pension and then squirrel the money away in an ISA. Of course, rates are low now, but when interest rates do rise, the gains would continue to be tax free.

bigglesworth

Providing the next government does not change the rules.

Again.

Pistolpete2

Was just trying to find what the state of play is regarding the Pensions Bill 2013 - supposedly it has gone through the House of Commons and is with the House of Lords.

https://www.gov.uk/government/upload...ation-pack.pdf

Here is the info section from the Information Pack for the peers:

'Current pensioners and those who reach State Pension age before 6 April 2016 will continue to be able to defer their state pension in line with current rules, even if they defer beyond April 2016. It is the date on which a pensioner reaches State Pension age, rather than when they begin to claim
their pension, that determines whether the current rules or the single-tier rules apply'

Editha

Option b: You can defer after you have claimed your pension, ceasing payments for a while. You are only allowed to do it once. People with a single tier pension will also be able to defer, but at a lower rate.

dunroving

It is sometimes difficult to differentiate what "is" from what "is planned".

The media seems to publicize politicians' utterings as if they were reality: "Labour will reduce student fees!!!" might mean in the small print that Ed Milliband SUGGESTED in an interview that IF Labour is elected at the next General Election, and IF the stars are aligned the right way and IF the sun is shining they will "launch a consultation to look into the feasibility of reducing student fees for those who come from households with an income of less than £60,000".

Re: all of this pension stuff, most of it doesn't seem to have been approved and legislated yet, including (I think) aspects of the moving back of retirement age, the move to a flat rate pension, etc.

Editha

The Pensions Bill which will bring in the Single Tier Pension is expected to receive royal assent this spring. You can follow its progress here:
http://services.parliament.uk/bills/.../pensions.html