CompaniesSep 2 2014

State pension dilemma: defer or not defer

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

Many individuals choose to work beyond state pension age so decision to defer the state pension is being faced by greater numbers, Andy James has said.

The head of retirement planning at Towry said: “If set to receive your state pension before the Budget changes and you do not feel the need to take the income, then seriously consider deferring. If however you will end up on the new single tier pension then it is probably only worth deferring if you will be saving income tax in the long run.”

In a survey, which polled 501 adults who are working and have a personal income of over £40,000, the wealth adviser revealed that 65 per cent of over-50s still in full time employment intend to continue to do some form of paid work during retirement.

Under current rules, people who defer claiming their state pension will get an extra 1 per cent for every five weeks that they put off. The deferral rate totals a 10.4 per cent increase a year, amounting to £611, if eligible for the current state pension of £113.10 a week.

Mr James added: “In the current environment where interest rates remain at historic lows of 0.5 per cent, this is certainly compelling – especially for what must be considered a safe investment.”

Adviser View

Andrew Hursthouse, co-director of Sheffield-based The Pension Planner, said: “It is all down to a client. By deferring you will get a higher income when you come to draw it but you will miss out on the income during that period. So it is likely to be those who can afford to defer.”