State Pensions

Question 1

Deferring state pensions pre 06/04/16

Answer 1

If SPA is before 6/4/16

• 5 week minimum deferral
• 1% increase per 5 weeks (10.4% p.a.)
• option to commute derferred payments for a lump sum after min of 52 weeks
• interest on deferred payments is 2% above BoE base rate
• increased pension income is taxed at marginal rate
• lump sum tax at marginal rate but can not take you into next tax bracket
• spouse inherits deferred benefits on death if still in deferment

Question 2

Deferring state pensions post 06/04/16

Answer 2

• by not claiming state pension when due
• one can defer for a minimum of 9 weeks
• 1% increase per 9 weeks
• no lump sum commutation option
• in the event of death in deferral
• estate can only claim a maximum of 3 months deferred payments

Question 3

Differences between pre and post 6/4/16 state bens

Answer 3

• basic state pension + earnings related pension VS. Single tier pension + protected amount
• 30 years qualifying to get full entitlement vs 35
• 1 year minimum to get any entitlement VS. 10
• contracting out option VS no option
• divorced or deceased spouses record could be used to increase entitlement to BSP VS no other records can be used
• 5 week 1% deferred option (with a lump sum option) VS 9 week 1% deferred (and no lump sum option)