dunroving

But where would you get 5%, with protected capital these days? You'd be lucky to get 2%.

not2old

.

that's close to a 10 year payback for deferring one year for the money you did not collect.

Depends what you're trying to do. By deferring 1, 2, 3 or more years you dont have use of that money, then any extra pension you get is more income in the future & liable for tax when added to any other income as well for those on pension credit will reduce that also

Editha

I was comparing paying 3a with deferring. The payback time for 3a will be longer than deferring for most people.

However, both are inflation proofed through the 'triple lock' on state pensions. Taking that into account, both represent a good return on investment compared with an annuity.

Both are really only relevant to someone who has savings and is already above pension credit level.

In my own case, I reach pensionable age next year when I am 62 and five months. I intend to defer taking the state pension until I am 65 (for 124 weeks) by which time my state pension will have an uplift of 25%. I will have foregone £14,024 that I could have claimed, but gained £1470 p.a. additional pension from the age of 65. I will be nearly 75 before I get my money back, but since life expectancy for women is 83 and I have a hale and hearty 88 year old mother, I think that is a reasonable payback time.

nun

If you have savings the deferring and also qualifying for the new higher level basic pension are both good investments for optimists who believe they will live well into old age. Having as much inflation linked guaranteed income when you are old is insurance against market crashes.

I will qualify for US SS at age 62 and UK basic state pension at age 66. I plan to defer both until I am 70 and then live well into my 90s........

Editha

Deferring is not such a good deal for people entitled to the new flat rate pension. The rate of uplift is only going to be 5.8% p.a., although that is still a better rate than you'd get from an annuity.

bigglesworth

Bear in mind that not everyone gets an uplift, and DWP may not tell you. So check very carefully (and get the answer in writing) before deferring.
If one is already in receipt of a qualifying payment, deferral gives HMG a free ride.

There was a case in either the Telegraph or the Times of a woman who had been in receipt of widows benefit when her husband died 30 years or more ago. She had since remarried. When she reached SPA she deferred the pension for 5? years. After the five years she received no increase (other than the normal) as she had already been in receipt of a benefit qualifying as a pension.

This mirrors our case exactly. My wife's first husband died at an early age many many years ago. We had already contacted DWP about deferral when I read this. After several insistent phone calls DWP eventually agreed. But otherwise the first we would have known is when we eventually took the pension.

So if your case is straightforward, there should be no issue. But I do not know if it is only a payment from Government that disqualifies an individual or any pension per se. Nor whether other payments in addition to widows benefit disqualify one.

My pension is not due for nearly two years yet. I shall decide nearer the time - IF the choice still exists. The Centre for Policy Studies calculates that the NI Fund will run out of cash next year. Leaving aside the mechanism of just how State Pensions are funded, there is plenty of evidence that pensioners have taken less of a hit than the general population over the last five years. Given the level of deficit reduction that has to be done after the election, I personally doubt that will hold.

So my view is grab it while you can - if you can.

mikelincs

State pension increases are equal to the inflation rate OR 2.5%, whichever is the higher, so, given that wages rises have been, for all but the highest paid, around 1%, then yes, pensioners have done better than the 'ordinary worker'. I somehow doubt that any of the political parties would be willing to incur the wrath of the ageing population by changing that.

bigglesworth

Also Return on extra capital in State Pension of 10.4 percent or 5.8 percent. New Increased State Pension. Freeing up pension pots.

As I said, I doubt that generosity will continue.

Editha

Or average earnings. Prior to the 'triple lock' the state pension was linked to average earnings, which means that without the triple lock, in the last few years it would have been going down.

Editha

I agree. I read that story in the DT too, and what stuck out for me was that the DWP had given the wrong advice but would not admit liability. I'm already chary of phone advice from government departments. There has been more than one occasion when HMRC have given me the wrong information. At least if it is in writing, you have some proof.

formula

Lets get the facts straight here. Those who can't/couldn't work, do not lose out on contributions towards their UK state pension. What made you think they did? They have all received a credit towards their state pension for each year they were too ill to work, unemployed or caring (for the sick or looking after children under the age of 15). I believe that age for children may have now been lowered to age 12?

Those working were always allowed to contribute towards a private pension in addition to their state pension contributions and their SERPS if they hadn't opted out into a company pension scheme. It's only in recent years, that those who don't work (the carers, sick etc) have been allowed to contribute towards a private pension too.

In fact, under these new pension rules, those receiving credits to their state pension through benefits (because they are a carer, sick or unemployed) will be the ones who will receive all or most, of the new state pension if they have 35 years of contributions (including any years they were awarded through benefits while they were sick, caring, unemployed). While those who worked and opted out into a work pension scheme, won't receive all the new full state pension.

For those receiving Child Benefit, this is why it is and has always been, important for the parent who doesen't work, to receive the payment for this benefit (because they get a state pension credit for each year, for x years). It's also why the changes in CB which now make this benefit an income based benefit, have meant that for many higher earners who now can't claim CB, it is worth their while chosing the option of the non-working parent to continue to claim CB and then the working parent completes a self assesment each year to HMRC (they pay that CB money back). It's also worth remembering that those who are subject to immigration contol, are not allowed to claim Child Benefit in their name because they would be breaching their visa rules because CB it is a public fund.

Editha

I'm not sure what you are trying to be clear about.

As you state correctly, people unemployed or unable to work due to sickness, were always credited with NI contributions towards their pension. But until now, a full state pension was not, on its own, sufficient to raise income above the level of means tested benefits. That is what the single tier pension is designed to do.

What I objected to in your earlier contribution was your suggestion that "
That simply isn't true. Most of the changes to benefits for the working-age population are designed to make sure people are always better off working, but the changes to the pension have nothing to do with that.

One of the intentions of the new single tier pension is to encourage people to save. Under the old system, saving could be counterproductive if you were on a low income, since you might not save enough to raise yourself above the means tested level, and if you did then you had just lost out on benefits.

I also objected to your characterisation of people who had contributed to a pension fund as those who had 'worked hard', implying that those who hadn't were lazy. I don't agree with you that it has ever been purely a matter of choice.

The best pensions have always been in the public sector, which provided final salary pensions. In that sector even low paid workers got a reasonable pension. This had nothing to do with working harder than anyone else. For the rest it has until recently been a matter of luck whether your employer offered a pension scheme. The charges on private pension funds generally made them a bad investment for small savers. The reality was that many or most low earners did not have enough excess income to save.

The pensions debate and the recent reforms have never been about 'welfare scroungers'.

formula

Many benefits are overplapping, where one will affect the other. State pensions are also classed as benefits.
Overlapping benefits - Entitledto

formula

Yes, it is.

It's only over the last decade, since the new welfare payments Pension Credit (a passpost to other income based benefits too such as Housing Benefit) and Tax Credits were invented as "a vote winner" as Blair called it, that benefits have been a lifestyle choice.

Under this new system, many have found they are now better off rolling up to old age having spend most of their money. Many parents find they are better off not working a full week as they receive more in benefits than they would do if they worked. Plus they can also then live in an area they could bever afford if they kept their own family because the generous benefits are more than enough for their rent. They were even allowed two houses in that nice area if they had lots of children.

Blair was advised by his then Minister of Welfare Reform Frank Field, that if he chose Brown's new welfare payments, then he would be creating a welfare trap. Blair chose Brown's welfare ideas and Field resigned. It didn't take long to find that Blair made a mistake and Field had been correct.

The biggest scare came when Labour found out that, for the first time ever, the benefits bill exceeded the amount they took in income tax. The Tax Credits benefit bill stands at 58 billion a year and is rising. Cue the welfare changes that labour then tried to rush in; such as medicals now required by those who claimed to be sick and the contract for this being given to ATOS; to try to reduce the ever growing, massive welfare bill that they had created.

They were trialling other benefit cuts internally, when they got voted out. The new government took over their ideas and recuited the ex Labour Minister of Welfare Reform; who had been the Minister who had warned Balir he was wrong; to help sort the welfare mess and return it to the safety net it was meant to be, instead of the lifestyle choice is has become.


Not just the state pension, but all benefits. i.e you can pay more of your salary into a pension and claim/claim more, income based, in work benefits.


Not true, see above.


It is. Everyone has the same free education and a chance at a career or to learn a trade. Under the system of the last decade, the kids who messed about in class (and stopped others learning) could have children and live off those who did work hard in class and in life. Each child the benefits claimants had, brought them more benefits. But as Frank Fields had warned Blair, they are caught in "a poverty trap".

Hmmm, not quite. Public sector workers were always low paid and they then got a decent state pension given to them to compensate that. It's only now that they have been given wages that equal the private sector over the last decade and will get their pensions reduced, that they have been protesting as they want both.

Private workers use to get good pensions, but Brown raided those pensions when he realised he had got all his figures wrong. About that same time, Brown sold the UK gold reserves and still had to borrow heavily to pay for all his mad spending schemes. By the time Brown was finished, the UK had more debt then they did after WWII. Interest only repayments on that debt cost the country about 48 billion a year.

It's strange how the harder people work, the luckier they get. As I said, everyone who worked could pay into a private pension or make other arrangements and now those who don't work, can too. They could freely change employers to one who had a pension scheme. Or they could remain in SERPS, the second state pension. People create their own "luck". There is no use in blaiming others for the mistakes you make.

Especially when Brown raided these pensions to bail out all his spending debts. See above.

They did if they worked. My father worked 3 jobs to keep us and buy a house, in times when most people didn't own their own property. But that all comes down to "the harder you work, the luckier you become' and the 'not blaming others for mistakes you make' again.


It's obvious to most people that it is. Did you think it is just a coincidence that the new state pension is set above the cap for claiming Pension Credit?

The new state pension has been set to ensure that it is over the income for people to claim the welfare payment Pension Credit, which will then passport them to other benefits. Parliament already have changes in place for those who hoped to claim PC under savings. Changes too if one partner is not of pension age.

As I said, even those that claimed benefits for most of their life in the UK, will get the new state pension as they have been credited for their years towards a UK pension. With this in place and the planned extra money to give to the disabled (by taxing the disability payments of the richer household claimants) there will be no more need for the benefit Pension Credit as far as I can see. That will cut the welfare bill.

No more claiming a UK state pension based on the contributions of a partner either.

This new state pension is all part of this governments (and the last) plan to reduce the ever growing welfare bill that the UK can no longer afford. That money is better spent paying off the UK's massive debts and encouraging people to work by reducing their taxes and giving them greater freedom to invest in their pension during their working life and with their pension pot when they retire.

nun

Brevity is a good quality.