Deferring your pension…

If you will soon become entitled to a state pension, then the big question is whether you should defer taking it, says FT columnist John Kay. Since you get a 10.4% increase in the pension for every year of deferral if you reached pension age before April 2016, you might think deferment is a no-brainer. But as economist Kay points out, to get an actual 10.4% return from deferment you would have to live for ever, and the actual rate of return you get will depend how long you live. Taking average life expectancy, he calculates that a woman who reached pension age before April 2016 should defer taking her pension until age 71-2. Sadly, the rate of increase for those retiring after that date is halved, and for a man with average life expectancy Kay reckons there is virtually nothing to be gained by deferral. But he also adds that if you are paying 40% Income Tax now but expect to be paying 20% later, that can also be a good reason for deferral.  For advice on pension planning, please contact us.

This entry was posted on Wednesday, 18th May 2016 at 11:23 am and is filed under Financial Planning, News, Pensions. You can follow any responses to this entry through the RSS 2.0 feed.

Tags: advice, pensions, Planning