OAP, should I defer?

[grpaway]

Any thoughts on the below.
I’m on the old OAP scheme and, from April 23, I shall be getting £156.20 pa…£8122pa. I’m 73 in June, health good
My wife is on a full new state pension scheme. She’s 70 in Sept. Health excellent.
I’m seeking opinions on whether or not I should defer my pension for a couple of yrs thus increasing the pension by 10.4% pa, besides statutory annual increases.
In general, we own house, have no debts, small 6 fig amounts each in ISAs and £45k in premium bonds which could be used to supplement shortfall of not taking my pension for 2 years or so.
Also, there is no doubt I shall be the first of us two to visit the happy hunting ground so the additional element of the deferred benefit will, I believe, be continued to be paid to my wife, when the time comes.
Thoughts would be kindly received.
Thanks

[Wuffle]

Given that you don't mention any additional income and everything else appears to be coming from ISAs, I would at least consider that you would be giving up a couple of years worth of personal allowance for sure against the hope of a bit more income later on.

Taking the state pension in a tax efficient manner now and spending your own money when you are banging up against the tax threshold needs to go in the calculation somewhere.

W.

[DrFfybes]

Taking the state pension in a tax efficient manner now and spending your own money when you are banging up against the tax threshold needs to go in the calculation somewhere.

W.

Pretty much this - if you have other taxable income then with Triple lock and increase from delaying, coupled with a freeze on tax allowances, you could easily by into 5 figures of pension in 2 years and hitting the annual allowance.

Any increase won't make a dent in future care costs, and whilst I see the rate of return for deferring is pretty good, ignoring inflation you lose £16,244 over 2 years for an extra £844pa, which means you will be 94 before you break even, by which time the extra cash probably will be going on care fees.

So personally I would say it is not a great idea.

Paul

[Gerry557]

Plus you could invest the surplus pension to increase your holdings over that two year period.

[Lanark]

Plus you could invest the surplus pension to increase your holdings over that two year period.

This is the right answer, invest the pension and then you can spend it later on your own schedule.

[Lootman]

I’m 73 in June, health good. My wife is on a full new state pension scheme. She’s 70 in Sept. Health excellent.
I’m seeking opinions on whether or not I should defer my pension for a couple of yrs

Is there not an age limit beyond which you cannot defer receipt of the state pension any more? I would have thought so, but do not know.

I was originally going to defer all three of my pensions for as long as I could. But I started my state pension because I did not think that the 5.4% annual increase for deferring was attractive. I found it useful to compute the breakeven point i.e. how old I would be before I had collected in total more by deferring. It was somewhere in my eighties.

[grpaway]

Thanks for replies.
Just to clarify, our only income is OAP, supplemented by income (divis, coupons and sales of securities in ISA, plus premium Bond savings) so tax is not an issue.
DrFfyes…in your reply you mentioned 2 yrs loss of income yet only 1 yr of 10.4% gain
Gerry 557 & Lanark…there is no surplus pension to invest.
Let me re phrase the Q.
If you were in good health, aged 73 and partner 70 and with savings as above would you buy an indexed linked annuity (OAP) payable in 2 yrs for perpetuity to either yourself and/or partner giving approx 2x £844pa for a sum paid of 2x£8122 or just keep the 2x£8122 cash?

[Alaric]

Just to clarify, our only income is OAP

If you are already receiving the State Pension, you cannot defer it.

If you aren't, you must have deferred it already.

[grpaway]

Alaric, with respect, if you are already receiving your OAP from the old scheme then you can defer it.
In fact you can defer it twice

[DrFfybes]

Thanks for replies.

DrFfyes…in your reply you mentioned 2 yrs loss of income yet only 1 yr of 10.4% gain

Let me re phrase the Q.
If you were in good health, aged 73 and partner 70 and with savings as above would you buy an indexed linked annuity (OAP) payable in 2 yrs for perpetuity to either yourself and/or partner giving approx 2x £844pa for a sum paid of 2x£8122 or just keep the 2x£8122 cash?

Are you saying if you pause your pension for 12 months you get an extra 10.4% from when you restart it? In that case the payback is 9 years 8 months, rather than 20. That 10.4% is for people who started their pension before 6 April 2016, otherwise it is 5.8% increase for every year (so your wife might get the smaller increase - I don't know when the ages all changed). I'm guessing from what you say you are pre 6/4/16.

I can see where you are coming from. It is a good rate of return, but the important question you are aviding is "what benefit do you get from it?" I know you get more money long term, but what do you want this for? - Give it away, pay for care, world cruise, etc.

I really don't know - the breakeven point is still 10.6 years away as you are a year on nothing then 9.6 on higher rate, which still puts you about 85. And at 85 are you likely to make good use of the extra £844 a year?

If you want to juggle money then up to 75 just put £2880 into a SIPP, gain on the tax top-up, and as a non taxpayer take it all out and put it back in the ISA.

If your wife can get 10.4% for pausing hers then it becomes a little more compelling.

Paul

[Gerry557]

Grpaway

The surplus pension was meant to be the pension that you were considering deferring as you didn't need it right now.

It was a suggestion to build it up and invest rather than defer. A bird in the hand and all that. Health might be good now but could change quickly or there is a potential of an accident, although I hope not. I'm not trying to scare you just highlight things can change unexpectedly. I speak from experience of such matters.

I'm sure it's not a clear cut decision but all the best trying to find a solution that works.

[CliffEdge]

Alaric, with respect, if you are already receiving your OAP from the old scheme then you can defer it.
In fact you can defer it twice

No you can't. I've tried. It's impossible in practice.

[grpaway]

Cliffedge,
I think it’s a play on the word ‘defer’
You are quite correct that you cannot defer your OAP twice after you have started to claim it.
For me, I did not start to take my OAP until I was 67, 2 years after I could have claimed it.
The system now allows me to defer my OAP once (more!)

[CliffEdge]

Cliffedge,
I think it’s a play on the word ‘defer’
You are quite correct that you cannot defer your OAP twice after you have started to claim it.
For me, I did not start to take my OAP until I was 67, 2 years after I could have claimed it.
The system now allows me to defer my OAP once (more!)

That's what they say but in practice it can't be done. I've tried. I have never come across anyone who has succeeded, though I did hear of someone who succeeded ten years ago.

[Kantwebefriends]

I’m on the old OAP scheme and, from April 23, I shall be getting £156.20 pa…£8122pa. I’m 73 in June, health good
My wife is on a full new state pension scheme.
Also, there is no doubt I shall be the first of us two to visit the happy hunting ground so the additional element of the deferred benefit will, I believe, be continued to be paid to my wife, when the time comes.

(i) There are presumably exceptions but the deferral terms for your wife's new-style pension are broadly unattractive. I wouldn't do it.

(ii) For you the terms are far more attractive. How much of the extra pension goes to your wife after your death depends on individual circumstances. In my case my wife will inherit 90% of the extra, by my calculation. So if you are certain that you want to buy a joint index-linked annuity this might be a good way to do it. I suggest you try this calculator. http://www.johnkay.com/pension/

(iii) The deferral and the £2880-to-a-SIPP stunt are not mutually exclusive. Do them both if you like. You'd have to hurry to do the SIPP thing before the end of the tax year 22/23. Then you could do it again later in April in tax year 23/24. Carry on once per tax year until you've passed your 75th birthday. Do it also for your wife.