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[Mister Rog]

He said that, if I hadn't rung up, I would have got an 'invitation to claim' letter in the post. Same with the state pension, you have to claim it.

If you don't need it, and you have normal life expectancy, then the usual advice in financial places is to NOT claim it and defer for 2-5 years. Deferred SP is increased by 1% every 9 weeks, or 5.8% p/a. It used to be 10.4% p/a prior to April 2016.

https://www.saga.co.uk/magazine/money/retirement/pensions/should-you-defer-your-state-pension

You won't get 5.8% in any (UK) bank account, and deferring by (say) 5 years may increase your SP from the current £158 maximum* to over £208 p/w. So £50p/w extra for a total cost to you of £158 p/w - you'll be in profit after just over 3 years from retiring. Therefore if you are expected to live for 8+ years after your SP age it usually makes sense to defer - assuming you can keep the wolf from the door in the mean time.

* New state pension under the new rules, no additional old rules Serps/S2P blah, blah, blah.

Actually, this is the exact opposite of what my accountant told me. Unlike private pensions, the state pension dies with you, even if it increases by being deferred, if you're dead it won't matter. Use it or lose it. Who can honestly predict their life expectancy ? Might get hit by a bus tomorrow 

 

[STEMO]

He said that, if I hadn't rung up, I would have got an 'invitation to claim' letter in the post. Same with the state pension, you have to claim it.

If you don't need it, and you have normal life expectancy, then the usual advice in financial places is to NOT claim it and defer for 2-5 years. Deferred SP is increased by 1% every 9 weeks, or 5.8% p/a. It used to be 10.4% p/a prior to April 2016.

https://www.saga.co.uk/magazine/money/retirement/pensions/should-you-defer-your-state-pension

You won't get 5.8% in any (UK) bank account, and deferring by (say) 5 years may increase your SP from the current £158 maximum* to over £208 p/w. So £50p/w extra for a total cost to you of £158 p/w - you'll be in profit after just over 3 years from retiring. Therefore if you are expected to live for 8+ years after your SP age it usually makes sense to defer - assuming you can keep the wolf from the door in the mean time.

* New state pension under the new rules, no additional old rules Serps/S2P blah, blah, blah.

Actually, this is the exact opposite of what my accountant told me. Unlike private pensions, the state pension dies with you, even if it increases by being deferred, if you're dead it won't matter. Use it or lose it. Who can honestly predict their life expectancy ? Might get hit by a bus tomorrow 

I entirely agree, Rog.

[LC0112G]

Statistically the average person (man on the Clapham Omnibus) will be better off, but yes you might get hit by the same bus.

The SP does die with you, but currently cohort life expectancy for a 65yo male is 21.2 years, and a 65yo female is 23.5 years. So on average, deferring for 5 years means most people will be better off. If your current health is above average, then you skew your odds higher. If you smoke 60 a day, get through 5 bottles of Scotch a week and live on takeaway meals then probably the reverse is true.

[Viral_Jim]

What's also worth considering is when you can best make use of your cash. Yes, on average you'll be better off by waiting. But for most people the last 1-2yrs of life are spent dribbling into your liquidised dinner in some institution. So very little cash required, unless you want liquified fillet steak that is. 

In contrast, taking more money up front may leave you worse off overall but having more cash when you're able to take advantage of it.

Just an alternative viewpoint.

[Field Marshal Dr. Opti]

What's also worth considering is when you can best make use of your cash. Yes, on average you'll be better off by waiting. But for most people the last 1-2yrs of life are spent dribbling into your liquidised dinner in some institution. So very little cash required, unless you want liquified fillet steak that is. 

In contrast, taking more money up front may leave you worse off overall but having more cash when you're able to take advantage of it.

Just an alternative viewpoint.

Yep.....that is mere existence rather than life.

[Field Marshal Dr. Opti]

What's also worth considering is when you can best make use of your cash. Yes, on average you'll be better off by waiting. But for most people the last 1-2yrs of life are spent dribbling into your liquidised dinner in some institution. So very little cash required, unless you want liquified fillet steak that is. 

In contrast, taking more money up front may leave you worse off overall but having more cash when you're able to take advantage of it.

Just an alternative viewpoint.

Jimmy is a smart fella for one who owns an elderly (and terminally dull) swede.

[STEMO]

I feel there is also a trust issue here. Hardly a day passes without us hearing about some financial crisis in one or other sectors of our public services. Brexit.......nuff said. Add to this the way the government flip-flops on benefits and pensions and people are bound to feel uncertain about the future.
A bird in the hand and all that.

[Mister Rog]

I feel there is also a trust issue here. Hardly a day passes without us hearing about some financial crisis in one or other sectors of our public services. Brexit.......nuff said. Add to this the way the government flip-flops on benefits and pensions and people are bound to feel uncertain about the future.
A bird in the hand and all that.

Yep, I like it when money magically appears in my bank account each month    However, I also have a private pension. I am NOT taking this and hope not to do so until the next tax year as I was still earning in this tax year so it may get taxed, and I have already taken a lump sum out of it. Plus, if I kicked it it would become part of my estate and could be inherited by wife and kids. State pensions however, take it while you can, absolutely.



 

[Viral_Jim]

Jimmy is a smart fella for one who owns an elderly (and terminally dull) swede.

All things in their time old chap! When I worked out what difference the £500pcm would make for me in my 50's, suddenly the BMW (or a similar replacement) didn't seem quite so "exciting". Once the pension and other interest-accruing assets are bubbling along nicely, then I will break out the toys

I feel there is also a trust issue here. Hardly a day passes without us hearing about some financial crisis in one or other sectors of our public services. Brexit.......nuff said. Add to this the way the government flip-flops on benefits and pensions and people are bound to feel uncertain about the future.
A bird in the hand and all that.

100% Agree, the government are already trying to (more subtly) change this for those of us in our 20's and 30's who are fortunate enough to be able to put away a few pounds each month. This new Lifetime Isa (and other ISA products) are specifically designed to lure us away from pension contributions, where the tax relief is given up front and onto the promise of tax relief when we retire.

I am not so trusting!

That said, swmbo and I will get one of these LISA's each as they are contractually bound to let you have the cash at 60, whereas there is already talk of pushing the private pension age past 70 or even 75 for someone my age 
 

[LC0112G]

That said, swmbo and I will get one of these LISA's each as they are contractually bound to let you have the cash at 60, whereas there is already talk of pushing the private pension age past 70 or even 75 for someone my age 

Govt legislation trumps contract law. It will be just as easy for the Govt to up the LISA age from 60 as it was for them to up the Personal Pension age from 50 to 55. I'm afraid trying to second guess what a future Govt may do is pointless; you have to play by the current rules. For that reason I see little benefit in LISA's @60 when the current Personal Pension age is 55 with 25% tax free cash. If you're a 40% tax payer, stuff your PP with as much as you can afford, If you're a 20% tax payer the case is less clear, but I'd still prefer pensions over LISA's.

Current State pension age will rise to 66 by 2020 and 67 between 2026-28. There is a proposal to increase it to 68 in 2044, but AIUI this legislation hasn't actually been enacted. The Govt have stated that they will not change the SP age for those within 10 years of their existing SP age. There was also a proposal to link the minimum age at which you can draw your personal pensions to SP age minus 10, but again that hasn't been enacted (yet). There have been no proposals to increase SP age to 70-75 (yet).

Recent pension freedom changes mean you can retire at 55, drawdown your private pensions at an increased rate from 55-66/7, defer your SP and continue drawing down the PP at a higher rate, then commence the SP at 70-72 and reduce the drawdown rate on the PP. This is where the 5.8% increase in dererral works - it's very tax efficient but only works if you don't need the SP money between 67-72. If you've saved enough into your PP then you shouldn't need the SP. 

[Viral_Jim]

That said, swmbo and I will get one of these LISA's each as they are contractually bound to let you have the cash at 60, whereas there is already talk of pushing the private pension age past 70 or even 75 for someone my age 

Govt legislation trumps contract law. It will be just as easy for the Govt to up the LISA age from 60 as it was for them to up the Personal Pension age from 50 to 55. I'm afraid trying to second guess what a future Govt may do is pointless; you have to play by the current rules. For that reason I see little benefit in LISA's @60 when the current Personal Pension age is 55 with 25% tax free cash. If you're a 40% tax payer, stuff your PP with as much as you can afford, If you're a 20% tax payer the case is less clear, but I'd still prefer pensions over LISA's

My understanding is a bit different, LISAs are a contractual arrangement between you and he provider. The government hands over the "bonus" 25% to the provider at the end of the tax yr in which you make the contributions and it is then yours. However if you withdraw pre 60, the LISA provider is bound under the terms to deduct 25% plus gains from the amount you receive. While I agree that they can change the rules (of course), this structure makes blanket changes harder.

Having said all of that, I haven't signed up for one yet so haven't had my nose in the details yet.

There are also a couple of other points worth mentioning. The lifetime allowance has taken several jumps down in recent years and I reckon even at current levels I'll hit it at some point, so I may as well have the "bonus" cash as hit the lifetime allowance a few years earlier than I would otherwise.

Also, under current rules ISAs of all types are tax free on withdrawal, which is nice if you are likely to be a pensioner paying higher rate tax.

With all these types of things, diversity is the key. I can see a pension pot being a main source of retirement income, but there should be some other assets in there too.

Talking of pensions, as you seem to be quite well across the subject, are you aware of any way to pass a pension pot between spouses before retirement? Due to the nature of our work I'm currently accruing the majority of the pension assets and SWMBO very little. The only way I've come up with to "pass" the assets between us is to divorce. Or for me to die, which seems a bit extreme

[Field Marshal Dr. Opti]

That said, swmbo and I will get one of these LISA's each as they are contractually bound to let you have the cash at 60, whereas there is already talk of pushing the private pension age past 70 or even 75 for someone my age 

Govt legislation trumps contract law. It will be just as easy for the Govt to up the LISA age from 60 as it was for them to up the Personal Pension age from 50 to 55. I'm afraid trying to second guess what a future Govt may do is pointless; you have to play by the current rules. For that reason I see little benefit in LISA's @60 when the current Personal Pension age is 55 with 25% tax free cash. If you're a 40% tax payer, stuff your PP with as much as you can afford, If you're a 20% tax payer the case is less clear, but I'd still prefer pensions over LISA's

My understanding is a bit different, LISAs are a contractual arrangement between you and he provider. The government hands over the "bonus" 25% to the provider at the end of the tax yr in which you make the contributions and it is then yours. However if you withdraw pre 60, the LISA provider is bound under the terms to deduct 25% plus gains from the amount you receive. While I agree that they can change the rules (of course), this structure makes blanket changes harder.

Having said all of that, I haven't signed up for one yet so haven't had my nose in the details yet.

There are also a couple of other points worth mentioning. The lifetime allowance has taken several jumps down in recent years and I reckon even at current levels I'll hit it at some point, so I may as well have the "bonus" cash as hit the lifetime allowance a few years earlier than I would otherwise.

Also, under current rules ISAs of all types are tax free on withdrawal, which is nice if you are likely to be a pensioner paying higher rate tax.

With all these types of things, diversity is the key. I can see a pension pot being a main source of retirement income, but there should be some other assets in there too.

Talking of pensions, as you seem to be quite well across the subject, are you aware of any way to pass a pension pot between spouses before retirement? Due to the nature of our work I'm currently accruing the majority of the pension assets and SWMBO very little. The only way I've come up with to "pass" the assets between us is to divorce. Or for me to die, which seems a bit extreme

Extreme but inevitable.


....as sure as night follows day you will 'drop off the perch'

[LC0112G]

My understanding is a bit different, LISAs are a contractual arrangement between you and he provider. The government hands over the "bonus" 25% to the provider at the end of the tax yr in which you make the contributions and it is then yours. However if you withdraw pre 60, the LISA provider is bound under the terms to deduct 25% plus gains from the amount you receive. While I agree that they can change the rules (of course), this structure makes blanket changes harder.

Having said all of that, I haven't signed up for one yet so haven't had my nose in the details yet.

The tax treatment of all saving schemes is subject to Govt rules. There is a risk they'll change the ages at which you can take a pension or LISA. There is a risk they'll lower or stop the tax free cash from pensions. There is a risk they'll stop higher rate tax relief into pensions. There are dozens of legislative risks which is why it's silly to try and second guess what a future Govt may do. You just have to play by the rules as they are currently set.

There are also a couple of other points worth mentioning. The lifetime allowance has taken several jumps down in recent years and I reckon even at current levels I'll hit it at some point, so I may as well have the "bonus" cash as hit the lifetime allowance a few years earlier than I would otherwise.

Yes, but the current lifetime allowance is £1M, which should be enough to produce circa £40K income in retirement. Once you add in the SP from 66/67/68 (currently £8K) that will make you a higher rate tax payer in retirement.  I too am hoping to get very close to the LTA, but I don't see a real issue with the £1M limit - if you're a HRT payer in retirement then the tax advantages of 40% on the way in vs 40% on the way out aren't great.

Also, under current rules ISAs of all types are tax free on withdrawal, which is nice if you are likely to be a pensioner paying higher rate tax.

Stocks and Shares ISAS spread legislative the risk. You've already paid the tax on the way in so they're (currently) tax free on the way out. But it's silly to assume the rules for ISA's won't change if you believe that pension rules might. There are lots of people with £1M+ SSISA pots paying no tax on them. Strikes me these are an easy target for a cash hungry Government.

With all these types of things, diversity is the key. I can see a pension pot being a main source of retirement income, but there should be some other assets in there too.

Talking of pensions, as you seem to be quite well across the subject, are you aware of any way to pass a pension pot between spouses before retirement? Due to the nature of our work I'm currently accruing the majority of the pension assets and SWMBO very little. The only way I've come up with to "pass" the assets between us is to divorce. Or for me to die, which seems a bit extreme

Nope - Die or Divorce are the only two legal ways.

If your wife doesn't work then you can pay in £2880 p/a to a PP for her. If she does work, then the limit is 100% of her gross salary up to £40K p/a. There is nothing to stop you paying money into her pension pot as long as you adhere to those limits. She'll only get 20% tax refunded from your 40% taxed income, but it'll all be tax free on the way out.

[Rods2]

Jimmy is a smart fella for one who owns an elderly (and terminally dull) swede.

All things in their time old chap! When I worked out what difference the £500pcm would make for me in my 50's, suddenly the BMW (or a similar replacement) didn't seem quite so "exciting". Once the pension and other interest-accruing assets are bubbling along nicely, then I will break out the toys

I feel there is also a trust issue here. Hardly a day passes without us hearing about some financial crisis in one or other sectors of our public services. Brexit.......nuff said. Add to this the way the government flip-flops on benefits and pensions and people are bound to feel uncertain about the future.
A bird in the hand and all that.

100% Agree, the government are already trying to (more subtly) change this for those of us in our 20's and 30's who are fortunate enough to be able to put away a few pounds each month. This new Lifetime Isa (and other ISA products) are specifically designed to lure us away from pension contributions, where the tax relief is given up front and onto the promise of tax relief when we retire.

I am not so trusting!

That said, swmbo and I will get one of these LISA's each as they are contractually bound to let you have the cash at 60, whereas there is already talk of pushing the private pension age past 70 or even 75 for someone my age 

Sensible, I opted out of paying the higher NI payment into the extra Goverment SERPS scheme and put the contributions into my private pension. SERPS was scrapped by Cameron with no compensation, just everbody getting the £133pw if they had paid NI for enough years.