How the UK govt TRAPS pensioners!

Explore whether pension deferral is beneficial in the UK and the US. Understand why deferring your pension might make you financially worse off, and learn strategies to avoid this potential trap.
Video related Links:
Chris Bourne's video on state pension: • Should You Take Your S...
Sources used in the video:
US GOVT:
www.ssa.gov/oact/quickcalc/ea...
www.ssa.gov/oact/ProgData/ar_...
www.ssa.gov/benefits/retireme...
UK GOVT:
www.gov.uk/government/publica...
ONS: www.ons.gov.uk/peoplepopulati...
OECD: data.oecd.org/healthstat/life...
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[@IncomeBoost42]

Thank you all for your comments! I've observed several similar queries in the comments, and I thought it would be useful to clarify a few matters: The comparison presumes all other factors remain constant - it's entirely based on the total sum claimed over a person's lifetime in the two scenarios. Of course, individual circumstances differ, and therefore, the most suitable course of action will vary accordingly. For instance, one might be contemplating whether to retire and start claiming the state pension, or to delay it while continuing to work? Or, there could be another situation where someone has already retired (and is utilising a private pension, ISA, etc.) and is deciding whether it's more beneficial to start claiming now or to delay. Hence, it's essential to utilise a 'like for like' comparison - for example, a comparable situation could be working an additional 5 years while starting to claim the state pension at the outset versus working 5 years and delaying the claim until the end, resulting in a higher pension payout. On the contrary, it wouldn't be logical to compare the total income from 5 years of extra work and deferred pension versus ceasing work immediately and beginning to claim the state pension. I realise this might seem straightforward, but I've noticed some comments alluding to this, so it's vital to make things clear. Now, in terms of the tax situation if you continue to work and claim the state pension, you might be subject to higher taxes as state pension income is taxable. However, if you don't require the state pension, you can invest an equivalent amount into a private pension and receive tax relief on your earnings. Over time, your private pension accumulates, and 25% of the amounts withdrawn are exempt from tax. This aspect wasn't discussed in the video because it was solely focused on the comparison between claiming now versus deferring, disregarding personal circumstances due to their infinite variations. Lastly, if you anticipate a high life expectancy, deferring may be advantageous, but note that under the new pension rules, it takes over 17 years to recover one year of deferral. Hence, in the video, you might have noticed that you may be marginally better off if you delay a year or two at the assumed life expectancy. If you live longer, you'll see the curve shift into the positive zone, meaning you're better off. Then there's a sweet spot between deferring enough to get a boost and not too much that you don't have enough time to reap the benefits. Thanks again for stopping by 🙂

[@pdjames1729]

this makes good sense but probably isn't the biggest 'trap' for poor people, even receiving (the pitiful) full state pension. Much more important is.. What's the threshold for Housing Benefit? (and some of the other low-income payment, Council Tax Relief etc..) Can a fully-contributed pensioner claim HB? My feeling is that the threshold is about £185pw so people with more contributing years might lose out on rent assistance, probably all of it. I'm trying to confirm, talking to the CAB etc... could you? . Also, as pensions are now a Benefit. Is there any point in having a small private pension or is it simply deducted from the statutory pension one has worked their whole life for?

[@carolwaller9605]

I am 60 unlikely to reach 67 due to breast cancer, I was originally promised I could retire and claim my pension at 60, Uk, guess no point deferring as I’ll be dead

[@IncomeBoost42]

@@carolwaller9605 I’m very sorry to hear about that.

[@pdjames1729]

@@carolwaller9605 ^^ there's the breach of contract right there. Imagine if one had paid into a private pension for your whole life and the bank refused to honour the package you bought? So sorry Carol :(

[@bluenose007]

What Pensioners dont have is Time

[@lindagray2282]

I worked from age 14 till retirement at 68 through an injury that crushed 4 vertebrae in my neck. I took governments advice in my 30’s and paid into a private pension scheme. I now receive state pension plus private one, that’s taxed!!! Im 76 divorced living on my own. As such I’m not entitled to benefits of any kind, even though I can’t turn my head any longer due to my crushed vertebrae, so had to give up driving. What makes my blood boil is younger neighbours living freely off the state ( our taxes ) who are better off financially than I am 👹

[@IncomeBoost42]

I’m sorry to hear about your situation. This isn’t right.

[@321backlip]

Very sorry to hear that it's not right the government continues to divide and conquer.

[@DissociatedWomenIncorporated]

Sounds to me like what should anger you is when the state fails to adequately care for you, not when the state succeeds in adequately caring for younger people presumably either with disabilities or who can’t find work. There’s no good reason both can’t be achieved, and both young and old should stand together to ensure the state provides _everyone_ what they actually need, instead of playing into the intentionally divisive benefits rhetoric of the government, and squabbling amongst each other which keeps us from actually holding those in power accountable.

[@mikemines2931]

Virtually the same as my situation, as I see it everything we paid in to the state is being taken by those who haven't paid in a penny.

[@lindagray2282]

@@mikemines2931 A couple near me, in their late 30’s, have been on benefits for as long as I’ve known. I’ve never known of any of them doing a paid days of work, yet they cruise around in our recent hot weather in a BMW 3 series convertible. Car isn’t new but I’m sure it won’t be long till they’re given a new one through the disability scheme as both are “junkies” 👹

[@chrisw1090]

I think there is also another element in the UK, the current tax allowance is £12,750 meaning an increase that defers above this will be subject to tax, so in your 5-year example the increased pension of £13674 would result in £974 being subject to tax meaning for a standard rate taxpayer it is only resulting in a net amount of £780. This could get worse if the increase in personal tax allowance does not keep up with the annual rise in pensions.

[@IncomeBoost42]

Yep, just like it has been frozen this year.

[@user-zb7qf8rq5r]

However there are a lot of highly paid motivated professionals who feel defined by what they do. A lot of them do not want to end their career and sit at home. If they are on a six figure income and get an extra £11k they will lose half in tax. Better to delay until they finally finish and switch to their pension income

[@johndoe-qg7jp]

Take your pension ASAP👍🏾💯 Do not defer F- ALL! You don't know how long you're going to live!

[@maureensummers8212]

Yes take your pension when it is ready to claim . Dont let the crooked greedy government keep it. Make the most of it and enjoy not having to get up early or work nights ever again. You've earned your retirement so claim it.

[@raylp4751]

If income is over £12570 then there's 20% Tax charge on money over the tax allowance

[@limyrob1383]

I took my pension at the first opportunity and advice anyone who will listen to do the same: Once "in payment" the legal status changes and it is very hard for changes to be made, changes will apply to those who have yet to draw their pension but not those who have. Index linked increases apply each year and add up so the earlier you start the pension the more increases you get. This applies more to final salary schemes. What if your health declines and you can no longer do the activities / travel you planned? Money early in retirement is much more useful than money late in retirement. For inheritance tax purposes late life income is a problem, you want to be spending and drawing down savings to avoid IHT.

[@mattdog1982]

Absolutely. I have a relative who took their pension early. They have got back the money they paid in and then some. Meanwhile I see others defer….. idiots.

[@bluenose007]

When you pay all your Nat insurance stamps you get your full Pension if you DONT pay all your stamps its made up to full pension with pension CREDITS which is a Benefit this entitles you to more Benefits so becoming better off than people who have paid ALL there stamps is this FAIR

[@hardlines2635]

This happened to my neighbour, he paid in full, his wife didn’t, she’s ended up with more weekly income than him, 🤣

[@michaelgoode9555]

It's just one scenario. If you have a private pension or other taxable income then buying extra years is essentially buying taxable income. The level of tax depends upon the entirety of the rest of your income. Also consider that for each year if UK NI shortfall bought you get over £5 per week. Work out depending upon your personal circumstances how long you will claim UK pension and how long it takes to effectively pay back the initial outlay. I have other incomes but I also have an NI shortfall when I was self-employed and thus eligible to pay class 2 and not class 4 contributions. If I can buy my shortfall years at class 2 rates then I will already be in net gain after just one year of state pension.

[@andrewhead6267]

Fortunately only half the people entitled to Pension Credit actually claim it. About 1.4 million. The other 1.4 million entitled to it don’t. As it’s income tested, you have to assume that many more who have not got a full pension record have other income that makes them ineligible go claim. People claiming pension credit are the poorest in society, and probably have been poor all their lives. I pay lots of taxes that pays girl things that I do not use. That’s being part if a community.

[@maskedavenger2578]

⁠@@andrewhead6267I heard that if your state pension is less than the new amount ,you can get it topped up with pension credit ,but to claim that you have to claim it under Universal Credit & then all your pension is then changed to pension credit . If that is so then all your pension then comes under stricter Universal credit rules & your normal savings allowance for is either gone or substantially reduced . It might be better not to claim pension credit top up ,in order to avoid the living nightmare & purgatory known as Universal credit ,once you are on that ,the only escape is winning the lottery or death .

[@mattdog1982]

That’s how you win in Britain now. It’s what you don’t have to pay for. I’m glad people are starting to learn. Pension credit is the best pension one can attain.

[@michaelc318]

It pensioners that have made this country so leave us senior citizens alone we have earned are pension and have payed it in so we are only getting back what we deserve

[@bertiesworld]

I've always worked on the assumption that cash is better in my pocket than someone else. I have control of what that money does.

[@MultiZero1968]

When I left school at 15 just before my 16 th birthday. I started working full time with the contract with the government that I would retire at 60 and get my pension. My mum worked all her life to, she was the last year that women got a pension at 60. She died that very year after working all her life and paying a full stamp.

[@eh1702]

You have put your finger on it: we all pay to give wealthier people more state pension than the average, and FAR more than the poor. Girls born in the most deprived areas of the UK now have a life expectancy 8 years shorter than those born in the wealthiest areas of the same towns. For men the gap is 10 years. Male and female life expectancy has been falling in the UK since 2017 - for the poorer half of the population. For middle class men it stalled, for middle class women it still increased a bit. Oddly enough, even some upper class old men have slightly reduced life expectancy compared to a few years ago. (This might reflect a change in the lifestyles of the upper crust over time, away from outdoor leisure pursuits to more sedentary life.) But the gap in HEALTHY life expectancy is even worse. People born in wealthy areas of the in the UK can expect to reach 70-71 in good health. Those born in poor areas move into poor health 19-20 years earlier.

[@Dunk1970]

@@eh1702 That's only looking at the story from one angle though. The higher earners you speak of will have paid far far more into the scheme than the poorer people. Once you analyse it that way, the poorer people in society are getting a bargain. The same is true regarding every aspect of running this country including the NHS. Analysis done recently showed that those breaking into the top 10% of earners by the age of 40 would contribute £250k into the state pension pot and would only get back £248k if they managed to live to 90! This also ignores that they could instead have invested that money in a private pension scheme or something else and recouped a heck of a lot more money through cumulative growth. The reality then is that those better off people are pumping money into the scheme to pay for the less well off. Sure you can wish wage disparity was different, but the state pension is heavily rigged in favour of the low earners, not the high earners.

[@lenb9037]

@@eh1702 Does this life expectancy have anything to do with being on drugs? I live in a deprived area and from personal observation would suggest this as a possibility.

[@goodgood9955]

Most people DO NOT live to 83 Years!

[@stevenhull5025]

Exactly. My father died at 82. My mother died at 49. My younger brother died at 47. My best friend died in his 40's as well. My advice. Take the money when it is staring at you in the face. The government want you to defer taking the pension in the hope you die.

[@SidBonkers51]

Its an average so some will live longer and some wont live as long but 83 is the average, or 85 in the UK presumably because the UK has free at point of care health care for everyone.

[@sayitlikeitis8759]

@@SidBonkers51not for much longer …..

[@gbwildlifeuk8269]

​@@sayitlikeitis8759best get saving then eh

[@sylviadugdale1035]

I would BESEECH everyone to take pension as soon as possible as you never know what lies round the next corner my parents died at60 and two brothers as well another had major stroke

[@dingopisscreek]

I agree. Took mine at 65. My father died age 48 so never saw his. Mother died age 88 so 28 years of pension for her.

[@gamingtonight1526]

Because of the well talked about 10% rise for pensions, I, as a new pensioner, found myself earning £2 too much to get Pension Credit, an extra £210 payment. I wonder how many new pensioners, like me, are finding the reason why the government was okay giving the 10%!

[@ianhouston4424]

The annual UK State pension increase is based on the CPI (Consumer Price Index) value for the 12 months ending with the September of the preceding year and is implemented at the start of the new Financial Year around 6 April of the following year. This year it just happened to be 10%. Not everything is a conspiracy.

[@StellaAsh]

Cut your hours

[@tonihunnisett4302]

I have been similarly affected. Problem is the government have set the pension credit claim amount 50p below the full state pension amount, so if you receive full new state pension you will never qualify for pension credit

[@queenidowu13]

Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got talking about investment and money. I started investing with $120k and in the first 2 months , my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and gets more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family....

[@queenidowu13]

@@Penelope-Valentina Quitting may not be the best approach if you ask me. This is where an AI comes into the picture. I barely have time to trade myself as my job swallows up most of my time. Alice Marie Coraggio, a licensed fiduciary whom has made me over 5 figures in profit in less than seven months, handles my investments. I could leave you a lead if you need help.

[@queenidowu13]

@@Penelope-Valentina Alice Marie Coraggio

[@queenidowu13]

Lookup with her name on the webpage

[@Oliver-Lucas]

@@Penelope-Valentina Alice Marie Coraggio her trading strategies is working for me for more than a year now and I’m making good profit from the stock market and she's 100% honest, reputable and trustworthy...

[@BLOCKsignallingUK]

@@Oliver-LucasShill

[@roseannallan4944]

My mother and father always told me never take out a private pention I never did and was glad I didn’t

[@dingopisscreek]

I retired age 65 in 2017 and took my pension as soon as it was available. I did consider deferring, but decided not to. Good choice. I am in good health and intend living as long as possible to claw back as much money from the government as possible. Every year is a bonus, and whilst I am not keen on living to a very old age (especially if my health deteriorates) I would like to have a few more years to enjoy the contributions I paid in.

[@keithwilkins1437]

There is another hidden poverty trap ----Many OAP who are on pension credit still have to pay maintenance charges on owner occupied flats .That could be £50.00 per week with no financial help .

[@IncomeBoost42]

That's one of the reasons I wouldn't want to buy a flat - the leasehold structure and recurring ground rent feels like never ending debt! Another reason is that I like a small garden :)

[@keithwilkins1437]

@@IncomeBoost42 That is very true .I wanted to downsize for a reason ,but the maintenance were very reasonable in the beginning .(I do have a very large balcony) .Many OAPs are much worse than me ,thoigh .

[@evokestudiosbrighton]

True, but you still have to keep your house in order, they don't repair themselves so you will still have a maintenance cost somewhere.

[@karenshurman1914]

Upgtuuo

[@spindelnett6315]

After the Robert Maxwell pension scheme theft decades back, I just stuck with a state pension. Seeing the employment trap of 'work until you're useless', I burnt my bridges and bought a small acreage at age 45. Planted woodland and orchard, eventually got lawful residence under the Four Year Rule, and now have started coppicing my first trees after 18 years. Free heating fuel for life, offgrid solar, springwater supply and even though I've only managed 60% of my N.I. contributions, the other 40% would have been lost to bills in a conventional residence, so I haven't lost out. Less is more.

[@IncomeBoost42]

That sounds so interesting and I bet it’s quite therapeutic too being in harmony with nature!

[@spindelnett6315]

@@IncomeBoost42 Harmony and 'embattled' with nature, are two sides of the same coin. But as I'm merely the steward of my land in my lifespan, I can only work with forces greater than I and never control. Lady Nature's taught me a lot.

[@IncomeBoost42]

@spindelnett6315 If more people understood this, the planet would be in a better place.

[@tedthesailor172]

I worked this out in 5 minutes with pen and paper as I reached 65. I wish my state pension was over 10 grand, though. Fortunately I have an occupational pension as well...

[@paulg687]

I could be wrong, but I think you’ve also missed the fact that if you claim early, you can also invest that early realized cash. So the 10k6 payments will effectively be larger for your comparison.

[@IncomeBoost42]

Yes, you are correct - I was looking at it purely on an initial value basis, not including the opportunity cost. The latter includes putting that sum into a private pension to gain tax relief and get 25% tax free later when withdrawing.

[@julianaylor4351]

Personally I will be better off when I get my pension. I am disabled and unable to work at 62, living on Universal Credit, but at least I don't have rent or mortgage to worry about, because I live in an inherited house. The pension when I take it at 66, will along my well stocked owned house, cushion me against inflation and the needs of my health as I age. So I'm not bothered. My phone and mobile are on cheap plans, I get discounted electricity at night, water is metered and I don't have gas and as I'm a Londoner I already have a free travel pass. I'm also not an extravagant person, who can cook, sew and do basic household jobs, also I have Freeview so the television license is cheaper than streaming, add to that a stable weight, so no need to change clothing sizes, a nose for a bargain, and all I need to worry about is my health and making a will. I do feel though that many people from younger generations, will not have such security and I blame governments from the eighties onwards for that.

[@KevinMorrison-xj2bt]

We retired to Cyprus 20 years ago, and it's the best thing we ever did financially and health wise, and pay peanuts in income tax on our pension's ! So the best thing to do is escape from the 'YUK' ASAP when you retire ! Oh our Council Tax is only €170 a YEAR and we get our bin emptied twice a week !

[@feslerae]

Hey man, just checked out your channel. Good info! Don't give up, keep the channel going! You inspired me to make some vids too.

[@IncomeBoost42]

Thank you for your encouraging words. The content creator journey isn't an easy one which is why I had to be passionate about the topics to keep going! Many fellow creator friends in the same space who started around the same time have given up, which is a shame because they were really talented. I'm happy you found inspiration and I look forward to seeing more videos and hearing more good news! :)

[@jeffharmed1616]

Thanks. Good evaluation. However, if you take NPV into account it is ALWAYS better to take your pension early when eligible. Then there are other risks to your pension pot that have not been accounted for. Then there is universal basic pay looming on the horizon ready to screw with your delayed pension.

[@IncomeBoost42]

Thanks, yep this does not explore the opportunity cost of delaying for example investing, hence no discount factor used here.

[@debbiethomas3687]

I claimed my state pension last September, aged 66, having worked all my life. I have a council bungalow, the rent on which has just increased to over £500 - not a lot when compared with private rental costs in my part of the UK, but almost half my pension nonetheless. The other essentials (water, gas & electric and Council Tax, phone, broadband, tv licence, car insurance, VED, MOT & servicing and fuel but not car repairs), take up almost all the rest. There is not enough left for food for an entire month for me, let alone my two cats, and certainly nothing for emergencies, so I am still working full time because I need to and will probably need to for pretty much the rest of my life. I sometimes wonder what is the point of it all.

[@williamkennedy5492]

I often think what has the government done with all the money i put into their coffers , as its not come my way , i still pay a lot of TAX !

[@dogmadogma5398]

MIGRANTS GET FREE MONEY EVERYDAY. ALSO FREE HOUSING. FREE 24HR ACCESS TO MEDICAL AND DENTAL. FREE FOOD AND MOST EXPENSIVELY FREE F**KING LEGAL COVER SO THEY CAN KEEP GETTING ALL THE PREVIOUS !!!!!!!!!!!

[@IncomeBoost42]

I feel your frustration! I know of countries with similar tax rates but with better public spending. You do wonder where all the money's going indeed!

[@tompiper9276]

Spent on Jingle and mingle events. 😩

[@Sam-jy5tj]

Ulez cameras, Covid contract, MPs pensions

[@plh256]

I'm in the UK but have some fixed rate industry pensions. That means that I'm paying higher rate tax now and, assuming I live long enough, will not be in the future. I'll also be poorer in the future due to inflation. So I worked out that a 5 year deferral was optimum and did that. Other considerations are that, if I die early, as well as paying 40% tax on receipt, I would pay 40% inheritance tax, so the gain to my children from taking the pension at 65 would only be about a third of the pension received. Also the uplift is a percentage - so you are not losing out on inflation. So for anyone who does not need the money now and is in good health, a 5 year deferral is worth considering (in the UK).

[@IncomeBoost42]

Those taxes really eat into your pension income don't they! It's great that you worked out what's the sweet spot between deferring and living long enough to benefit from the extra income.

[@simon1066]

Useful info, thanks.

[@IncomeBoost42]

Glad you found it useful.

[@alexblue6991]

My age 71yr old I worked long hours for 50yr years on low pay because I worked for fifty years I get less of a government pension than someone who couldn't be bothered to get off their arse and get a job they get the rest made up on benefits Alec from Scotland

[@kojomensah7474]

Thanks very much for the information every little bit counts

[@IncomeBoost42]

Glad it was helpful!

[@barnigranero5882]

Thanks. This is very interesting. The rise in pension age should be illegal because it breaks the social contract. Contributors are currently paying for pensioners to retire at 65. Everyone should get to retire at 65. Governments should be making sure that people have paid the right amount of tax to cover it and previous generations who haven't should have to pay more to catch up. Not have people who are retiring at 65 but have not paid their way be subsidised by future generations by them having to retire later. We all know which generation have not paid their way!

[@IncomeBoost42]

I agree and in fact that was why I made the previous video about State Pension resembling a Ponzi Scheme. There are strong questions of inter-generation fairness primarily due to a design flaw in the way state pensions are paid for - from the current working generation. Contrast with private (defined contribution) pension which pays out whatever you saved up over the years. The latter structure seems fair but may not be compassionate for low income earners. However, some might argue that these cases are precisely what the benefit system is for. I think even a middle ground would be much better than the current 'Ponzi scheme' structure.

[@barnigranero5882]

@@IncomeBoost42 Thanks. I just watched your previous video. I agree. My main issue with it is that governments are claiming that they have been forced to raise the retirement age and had no choice, when in fact, they have known this problem was coming for decades but chose not to take the correct action because they would lose votes of the largest voting block. None of those governments can blame previous administrations because at some point in that time and for several years, their political party were in government. There need to be consequences for politicians who did this. I am talking custodial sentences.

[@Daisy-tl2lh]

I paid in for 51 years and only got my pension age 67 having been done out of seven years old age pension by a government who promised me when I started work and still at school I could retire age 60 ... I am owed approx 50K and resigned to the fact I will never get that money because politicians are lying toads ... throughout my working life I was paid on average 20% less than men even those doing the same job as me ... saying a womans working life is equal to a mans therefore they should both retire age 67 is nonsense ... nobody subsidised me but we have immigrants coming into the country today who will never contribute anything to this country let alone 51 years worth of tax and NI

[@Tensquaremetreworkshop]

@@barnigranero5882 Politicians know what needs to be done- they just don't know how to get re-elected after doing it. Every change creates winners and losers. The winners sit back and smile- the losers get irate and bitch about it. The average voter is financially illiterate, and they know it. This is why social support of the elderly is investigated by every new parliament- and swiftly dropped when the consequences of meaningful change becomes apparent.

[@Tensquaremetreworkshop]

And everyone should have a long and happy life, without disease or heartache. But, back in the real world, sh*t happens. As life expectancy increases, keeping the retirement age at 65 is increasingly untenable. When the system started, in 1947, life expectancy was 63 - so most never got a pension at all!. It is now 82, so 17 years of average retirement. And it continues. If you are prepared to pay the extra taxes that retaining the retirement age at 65, then you have a personal solution. Pay that money that is not going to tax into savings, and the result will allow you to retire at 65. Job done. Think about it- hewing coal down a mine at 65 is nasty. Sitting in a warm office behind a PC screen at 67? Not so much.

[@stesan60]

Knowing how crazy the health insurance premiums are in the USA it is best to retire at age 65 in order to be eligible for Medicare. This should be factored in when talking about pension for both countries. UK does not have this issue since NHS stays with a person when retiring. :)

[@stesan60]

Good info though! :)

[@IncomeBoost42]

Absolutely, I read how the main reason for bankruptcy in the US is medical bills. One more reason to retire later in the US! Yes we have the NHS but it's overwhelmed and I personally have private insurance because it might take me months to resolve a medical issue otherwise. In any case, health should be first over saving money! Thanks for your comment :)

[@Tensquaremetreworkshop]

I delayed my state pension by a year- and got 10.4% more for it. Plus the increases on that extra. Already got the foregone year back and more. Kerching! I would like to personally thank all you citizens that are shovelling so much money in my direction- I appreciate it.

[@IncomeBoost42]

Good decision! Under the old state pension, deferring made more sense every year deferred pays for itself in 9.6 years vs 17.2 years now, with the new state pension.

[@Tensquaremetreworkshop]

@@IncomeBoost42 It was even better than that- the triple lock meant increases on the extra pension- currently adding over 35% to it.

[@tompiper9276]

​@@TensquaremetreworkshopYou have a moral obligation to enjoy it. Go for it!! 😊

[@glyncolman8901]

What about the threshold of paying income tax. If you defer as it could put you over the threshold..

[@duncancampbell9490]

The advantage of a deferral is that you will earn at least double the amount per annum. I see two years as the optimum amount to allow me to acquire a new car before changing to a retired status. Also the actual life expectancy for a 66 year old male is only to an average of 78.6 in the UK currently.... leaving me an around 8 years on a pension. ( Plus two years earnings at double the amount of the pension.)

[@roncouch]

Also, it could tip you over the income tax threshold and, hence, you would then pay tax (effectively) on your (enhanced) pension, which you might not have done if you took the pension from the standard retirement age….This nearly happened to me but I deferred my pension for only one year and managed to “avoid” tax. That is, my total invome from all sources fell below the current tax threshold.

[@tdsdave]

If inflation is high then not deferring might also make more sense? The value of a year one payment today vs the increased value paid out in some deferred year 5 payment future, might be reduced in real terms due to inflation. Does this work like this?

[@IncomeBoost42]

Good question! If state pension were not adjusted for inflation, then yes deferring would make sense. In practice, they are usually adjusted to reflect inflation since the govt's 2010 promise of a triple lock i.e. state pension would rise to the maximum of either inflation, earnings or 2.5%. However, with the recent high inflation they 'paused' this triple lock promise. So I guess the real moral of the story is not to rely too much on the govt when it comes to personal finance!

[@patmartin9727]

The government cons pensioners all ends up. I receive the old pension plus serps which brings me up to about the same as the new pension last year but this fall further and further behind year on year as pensioners on the old pension only get the yearly rises on this amount which is at the moment about £45 less the the new pension. And not on the full amount. The government is trying to make sure we are just above the level that allows us to claim pension credits which opens the gateway to other benefits like free tv licence, council tax reduction rent rebate for people who rent their homes.

[@BlackBuck777]

Interesting how the algorithm works. I'm considering deferring as I hope to remain employed for some time, but put off by the potential additional tax bill. (I'm not wealthy but not poor either so living on the edge if you like. Paid into the system since I was 16 without a break too, so I reckon I deserve the payback.) You don't mention the compounding effect of deferring. So, if you defer for 1 year and gain a 5.8% uplift, this applies also to any future government / budget increases, as long as you live. Obviously you wouldn't want to push your luck but I'd have thought if you can, you should defer - it's better than money in the bank (as at March 2024)!😄

[@ianmax69]

What about the UK state pension is indexed linked to inflation and if you don't have any savings or additional income you qualify for reduced council tax and you also qualify for rent allowance if living in a council or housing association house/flat.. these additional benefits out way the loss you would incur from delaying your pension...

[@IncomeBoost42]

Great point! I did not think of this 'strategy' but indeed those benefits could indeed offset the loss. There are also other tweaks you can do for example (I learnt from Chris Bourne's video), in case you claim state pension early but don't need it, you could put it back into a private pension to get tax relief and grow it further. Later when you withdraw it, you get back 25% tax free. And because you'd have reached minimum retirement age by then, you can access that pension anytime instead of waiting for a usual payback of 9 or 17 years for every year of delayed state pension claim. I found that particularly compelling! But back to your point, absolutely - we need to look at people's circumstances and do some maths! :)

[@jeremybarker7577]

If you claim a means-tested benefit (such as housing benefit or council tax reduction) but have deferred your pension the amount of benefit is calculated on the basis of the income you would have if you were receiving your pension.

[@christopher554]

Since the Tory’s frozen the tax threshold aim pay I tax .and iam on a very low private pension ,it a joke

[@IncomeBoost42]

And they ‘froze’ the personal allowance too as that hasn’t increased. Nor the ISA allowance !

[@christopher554]

This government just wants too screw the little people

[@wharpblast264]

State pensions are likely to be more secure and better inflation protected (eg UK triple lock) than any other source of income you are likely to have in retirement. This makes the state pension more "valuable" than a simple calculation can illustrate. Also although UK state pension can no longer be inherited by a spouse, I don't think this is true in US. Therefore need to take two live expectancies into account, especially if age difference between partners is significant.

[@anthonyharris7780]

But if you get a pension rise is it not based on the gross pension that you are receiving and has this been taken into account in the calculation?

[@IncomeBoost42]

I've used the 'real' figures here for simplicity i.e. today's value (rather than future value). Since both are adjusted by inflation, relatively speaking they are the same. It would be different if one is affected by inflation and the other isn't. That said, the pause in that triple lock guarantee by the government has thrown this assumption of the model!

[@abrr2000]

These assume no outside monatary matters, such as needing more income than pension provides to finnish off paying your morgage for example, as It's perfectly reasonable to assume that you'd earn more money by working. Retirement isn't only about money however.

[@ANM21985]

Nice video and in a technical sense you are right, you do get less money in the long run... but tbh some people STILL might be better off deferring. Let me explain: the full state pension is £883 per month. It would be quite tight to live off that imo. it's do-able but you won't have a great standard of living. but if you delay by 5 years you'll then get £1139 a month ..which is a better standard of living. You would obviously have to go back to work for the 5 years you have deferred your pension..., but lets face it... you'll be earning considerably more working than you would be sat at home. So in the long run if you are a person who cares more about standard of living ..you are in fact better off deferring your pension. but you are a person who cares more about leaving behind the rat race/9 to 5 .. and value your free time more than standard of living then you are better off taking your retirement at the state pension age.

[@IncomeBoost42]

Indeed, that’s low to live on but remember you can claim state pension and still work. For tax purposes you can put any earnings in your private pension and get further benefits of pension pot growth and 25% tax relief when you withdraw.

[@mikemines2931]

Anything above minimum wage no matter what source becomes eligible for PAYE.

[@Deepthought-42]

Not only will you receive less in the example but due to inflation the purchasing power of a deferred pension will be less so its future value should be discounted back to a “present day” value

[@evokestudiosbrighton]

Have you taken into account the extra tax you would pay if you claim from the start and you decide to keep working? would that make a difference?

[@IncomeBoost42]

Hi Peter, as state pensions are taxable, if you keep working you would pay more tax. How much tax depends on your income bracket but remember if you don't need it you can put it into a private pension for growth, 25% tax exemption on withdrawals assuming your earnings are sufficient to get the full tax relief. I've just pinned a post where I mention this and also when deferring gives you a higher total.

[@jblogs1000]

thanks for the vid i agree but also the higher the pension the more tax you have to pay so you loose 5 years pension so you can pay it back in tax

[@cafsixtieslover]

I took mine as soon as I was entitled to it. I could not afford to wait. I have three small private pensions on which I pay tax. As a Waspi I got done out of nearly six years anyway. It is not enough to live comfortably on so I am still working full time and paying tax on the lot. If the Government does not raise the personal allowance all pensioners will have to pay tax soon - that is not fair.

[@user-qn9xj9bu7v]

Its the quality of years left to enjoy that pension as well

[@lilianandersonmayne4968]

Why do this to old age how spiteful this Hunt doing how much hateful can he get putting this on old they will never trust a Tory

[@debse.7286]

Yes, but its a good insurance policy for if you do live longer, and your cash savings run out.

[@geobixx8132]

Althought I am drawing my state pension I am still working full time which I plan to do for another year. To avoid paying 40% tax I put the equivalent amount (10k), into my occupational pension pre tax via salary sacrifice. This way when I do take it, it will be eligable for 20% tax free. Also, if I die prematurley them money goes to my family and not the state.

[@IncomeBoost42]

Brilliant!

[@brassj67]

I had 25 years of full NI contributions in 2008 when I emigrated to Canada with a shortfall of just 5 years to claim a full pension and then it was raised to 35 years. Now I am having to pay 10 years of voluntary contributions to make up the shortfall with 8 more years to pay. I will be 64 and will have to wait until I am 67 before I can claim it. Its currently £3.15 per week or £163.80 for the contributions. Once I start claiming it will not increase every year and remain frozen. If I lived in the US however it would increase. Talk about being ripped off 😣

[@helpmehelp3009]

If the Government invested the amount received each week into stocks and shares, or gold, for you, when you retetired you would have a pension pot so large you would not work anymore, also you all could retire at even 55, which would leave U.K. without work force. Sa e with car tax which only about 10% of amount collected goes on repairing roads. So when my kids ask fora car I am going to tell them get a local job and buy a bike!

[@GWAYGWAY1]

And they put you over the tax start point.

[@logothaironsides2942]

My father retired at age 65 which was the earliest age in 1980 that he could get the state pension. He got one months payment and died . There really are no guarantees that you will even live the average life expectancy.

[@maureensummers8212]

I'm so sorry to hear your father died only after having received one months pension. Life can be so unfair, can't it.

[@logothaironsides2942]

@@maureensummers8212 Ah thank you. Yes indeed.

[@joedoyle123]

Just about to start receiving State Pension and why oh why is it classed as taxable income! In my case i have to give almost half of it back to HMRC😢

[@IncomeBoost42]

Remember you can contribute into your personal pension if you don’t need the money right now. You’ll get 25% tax free cash later, plus tax relief, plus compounding!

[@mookyzook]

I deferred my pension and kept working. There is no way that I would have earned as much retiring at 65 as I have while still getting a wage. I also get a a company pension. So how does your model work in this case?

[@GrooveTasticThang]

Don’t forget that 5.8% would be compounded over the 5 years? Still think you are correct get the money asap and either invest it or spend wisely as becoming an active pensioner means you are protected from whichever crazy government changes happen in those 5 years ( never to your advantage)

[@spivvo]

Hhhm… you should do that same exercise using the discounted values of the cashflows. £10 today is worth more than £10 in five years from now…. 10/ (1+i)^5. i is inflation in this example but it could also be the rate of return that you could achieve on that money. If you do it my way it creates an even stronger argument in favour of what you are saying. (I am a retired bond and currency manager). Fabozzi is your freind on this one.

[@IncomeBoost42]

Yes, I haven’t considered opportunity cost or tax implications and other scenarios- I wanted to convey purely on the angle of life expectancy alone it didn’t make sense. Regarding the inflation part, they are both adjusted according to inflation- so this is looking at the real value with the base year being the year of earliest retirement. Thanks for watching

[@lewlewis6511]

Its not that simple if you carry on working after retirement age whilst deferring, the pension will consume most of your tax free allowance, pushing many into not only normal tax rate but into the higher tax band too. Doing the right thing providing for yourself and buying your own home won't see you enjoying all the extra benefits that the benefit game players are expert in, how you feel about that yourself will influence what you do throughout your working life as well as when you reach retirement age.

[@exotic444]

So how long would you have to live in order for it to be worth it?

[@IncomeBoost42]

Every year you defer takes over 17 years to repay itself. So if you defer 1 year at age 67, it will pay off after age 84. Based on this alone, you need to live until at least 85 to make that decision worth it. Sadly, this is near the borderline of life expectancy.

[@exotic444]

@@IncomeBoost42 Thanks a lot.

[@kevinkane7667]

And will the government continue to match inflation? Clear scenario is that a future government will let inflation erode the state pension whilst supporting those without other pensions via pension credits.

[@IncomeBoost42]

They had a triple lock on pension meaning it would be adjusted by the highest of earnings growth, inflation or 2.5%. Well, as you guessed they paused it for this year. So indeed there is some erosion there already.

[@stephenboyd4934]

This is blatantly obvious IMO because inflation has an effect too

[@kimballentyne3482]

Thank you for sharing your informative information. Grab what you can. Authorities will always cheat.

[@IncomeBoost42]

You’re welcome! I agree, you never how things can change with legislation - a bird in the hand is worth two in the bush as the old proverb goes!

[@georgeday5901]

Do not forget income tax .you still have to pay it if you get more than 12500 pounds a year at 20%. This is as a single person.

[@michaelbrennan6045]

I won’t be delaying the government is delaying the dam thing as it is 67 I’ll be lucky to be able to collect the state pension at all the way things are going.

[@MrRocketguitar]

Also you will pay tax over personal allowance anyway

[@davidevans6758]

The bigger unsolved question is, is the life expectancy clock resetting in the UK to a pre 1939 era. Before social food rationing during the second world war, give those now in their senior years a longer life than generations before them. Post-war baby boomers might be healthier but does their clock stop earlier. Unhealthy lifestyles in the 1970s and since, are now biting more and more. So many celebs dying in the mid to late 70s recently. Is there a trend. With an estimated 3.5 million pensioners over the age of Eighty by 2030, can those boomers get to their mid-Eighties without falling serious ill with MCI or other neurological impairments. If not then it falls on the 10 million odd carers in the UK to keep them going, oneway or the other. And that is stressful.

[@iantobanter9546]

Given the state of the UK finances and its open door immigration policy, I anticipate the post 2024 government giving serious consideration to the old LibDem proposal (and current Australian policy?) to means test eligibility for the state pension. Grab it while you still can would be my motto.

[@hardlines2635]

I said this when compulsory work pensions were introduced, in the future state pension will be renamed as old age benefits. If you’ve paid into a work pension you won’t get anything, also if you own property you will be stuffed, I’ve signed my house over to my son. When I retire I don’t want to have anything they can shaft me for or take from me.

[@archie6945]

I deferred my pension because I'm still working. If I took the pension, thought the whole amount would be taxed at 40%...so instead of 10k, I'd take home £6k.... Hadn't occurred to me that I could have taken the pension but invested the money in a tax-exempt private pension (& my company would contribute £400 monthly if I invested £200). Hoping not to live beyond 80!

[@PaulGreenwald]

When Central Bank Digital Currency is implemented will i lose my pension unless i join this nightmare progammable money

[@IncomeBoost42]

I worry about fraud - we’ve seen how crypto attracted lots of scams and frauds. The next big money heist might be from someone sitting at their pc.

[@davidlean2879]

I think you should have accounted for the eroding effect of inflation

[@IncomeBoost42]

Yes, I kept inflation out for simplicity but you are correct, the state pensions whether early or late claim will be adjusted according to inflation (at least that was the promise!). However relatively speaking, since they are both adjusted by the same factor, it does not make a difference when comparing to each other. For example, the 10k and 13k will still be 10k and 13k equivalent in terms of purchasing power when adjusted for inflation. However, I should have mentioned I'm working in real values! Thanks for pointing this out.

[@modestproposal9114]

Surely life expectancy at 67 is different to life expectancy at 72?

[@george6977]

A 2 dimensional graph is clearer.

[@stephenizzy1]

Workplace pension is another con, you will loose all your benefits because it will take you over the threshold, A old friend said he had a private pension and had to pay full council tax and a few other things, my mum only has the state pension full national insurance, pays hardly any council tax and get loads of other help, you have either got to have a bloody good private pension or just the state pension, as for the workplace pension it's another con, I opted out within a month and every 3 years it gets automatically reinstated so you have to opted out again.

[@shirleyashton3597]

In the UK your pension will have income tax if it is over £12500 per annum and so deferring pension is a bad idea.

[@ambydaly5713]

What you haven’t calculated is also tax you pay extra on earnings

[@marykapadia9385]

Gov't uses highly paid actuaries to make offers to the serfs... They always make sure that the peasants lose out... otherwise there would be no offer of deferral...

[@maureensummers8212]

Yes, us serfs help pay the crooks un parliament their salaries so they can keep their jobs and find other ways to fleece us. Scammers.

[@roberttreppleton8979]

Bop till you drop ! Take your pension , keep working till you want to stop ! Pay 40 % tax but no stamp ,

[@scareybailey]

2023 UK life expectancy is 81.77 years and dropping, not 85 years.

[@llamudos9809]

Ask yourself what is retirement to you? (add as many reasons below) 1. Is retirement making sure you are debt free? 2. Is retirement making sure you you have the option to carry on working after retirement to keep you occupied? 3. Is retirement to you a way of stopping work as fast as you can to enjoy life without work? To do what you want in your time? 4. Is retirement to you frugal living after expenses? 5. Is retirement to you standard living after expenses? 6. Is retirement to you luxury living expenses? 7. is Retirement enforced due to unforeseen reason (ill health, to support some, work efficiency cost savings gave opportunity etc..) There will be other reasons to why you decide to retire. ADD below! But whatever your reason for retirement you need to first think about what you want out of retirement and then plan your needs in retirement. Calculate all your expenses weekly, monthly, yearly expenses and deduct that from your current income. Compare what you currently have to live off after all expenses are removed with what your potential retirement income is. This will then determine your needs /year Compare this to some of the reasons why you want to retire! Also note that the earlier you leave work the more fund you will need. People are living longer and you may need an income upto 100 as people are living longer. So if you leave work at 55 (not 67) you would need to have a retirement income lump sum that would need to last circa 45 years. The likelihood is your retirement time frame will be less than 45 years on average many people calculate this as 25 -30 years of retirement. Retirement may be seen as a time where money saved via (pensions (drawdown, DB, DC), ISA, Stocks, shares, Gilts annuities, Premium bonds, property incomes, cash savings can be utilised that gain enough interest to create a renewable income that never depletes. So that you leave an inheritance for loved ones after death. There are so many aspects to understand in retirement. So break retirement down into bite sized chunks by creating a Spreadsheet and work out all variables throughout potential retirement periods. Some people will have greater or less income at different times of retirement (e.g Some will leave early before state pension kicks in) Do you need a buffer fund from private pensions and savings before state? SO PLAN. ITS NEVER TO SOON TO PLAN YOUR RETIREMENT AND ADJUST YOUR CURRENT WAY OF LIVING TO PREPARE FOR YOUR FUTURE RETIREMENT!

[@markboard1966]

It’s easy to know we are all ripped off because It’s all made complicated .

[@michaelwhite8031]

We paid tax on our pensions when we were working.

[@eljay5009]

Not normally. Private and workplace pension contributions are usually made from your gross salary (i.e. pre-tax), it's one of the advantages of paying into a private or workplace pension.

[@davidfoster2006]

It’s Common sense the grab any cash as soon as you can, this deferral idea is nonsense.

[@hamishadamson4628]

Two MAJOR factors you completely ignored. If life expectancy is 20 years at retirement, deferring 5 years won't leave you with 15 years. If you survive the 5 years then your life expectency is longer than 15 years as those that died in the last 5 years are no longer part of the cohort. Also, if you're still working then any pension is part of your taxable income so it's very likely to be taxed at your highest rate or push you into a higher tax bracket.

80% of something is better than 100% of nothing.

[@bigbabatunde1218]

This is hardly a trap compared to what the lowest paid workers who end up as the poorest pensioners on basic statement pension with or without pension credit top up. Those pensioners will never be allowed to have anymore than £16,000 in savings without having all their other benefits stopped including housing benefit and council tax benefit. Let that sink in for a moment. No more than £16,000. The Government starts deducting money at around the £10,500 mark. The national health service is not fit for purpose anymore and any private healthcare is going to cost more than £16,000. *That's a trap, not this final salary private pensions of retired teachers and police officers nonsense some whine about.*

[@Vinsent1022]

i deferred any get far more than the norm yes, you pay tax but only 20p in every pound so your still far better off by thousands and not dying anytime soon so taking your money and run will cost you unless your desperate or skint.

[@porschecarreras992cabriole8]

I see no trap if someone voluntarily defers their state pension. It is stupidity and people should use maths to work it out!

[@CarlJones14]

There's a fundamental flaw. What about inflation? Official inflation is around half the real rate of inflation. Pension rises never match real inflation, and another point, many sheeple die much younger that 72yrs of age.

[@IncomeBoost42]

Yes they were supposed to match inflation with the 'triple lock' but that just got suspended with current inflation rates.... :(

[@CarlJones14]

@@IncomeBoost42 but tripple lock still doesn't work. Okay, your average sheeple worker has been screwed for more than 50yrs, because of pay had kept pace with productivity, or the stock market, pay would be more than double current rates. The last time I looked, Norway had an average hourly pay rate of €50 per hour. Sure, UK pensioners have done better, but still nowhere near what they should be getting. We have one of the lowest state pensions in Europe...

[@_superiormotivation]

Ahh what a complete scam 😢

[@steveholloway1963]

Biggest con ever create positive investments instead

[@user-xb4le4og8e]

This not science just common sense

[@bartz4439]

All is needed is basic math to calculate that. If adults can't do that - well done British Education System

[@Phil-bc2sd]

The uk state pension is triple locked and possibly one of the best pension in the world especially when you include FREE HEALTH CARE which many many other countries DO NOT HAVE .

[@IncomeBoost42]

Indeed, but they suspended the triple lock this year - so hopefully, it will catch up back to cost of living increase.

[@WizardNumberNext]

No man This does not work this way It is not 5.8% x 5 It 1.058 risen to 5th power This gives 32.36% increase Not just 29% increase You have had your rise from 1st and you get 5.8% on top of what you would get after year

[@IncomeBoost42]

Actually the rate is 1% every 9 weeks which works outs about (52/9) ~= 5.8% per year. It’s not compounded adjustment rates. See www.gov.uk/deferring-state-pension/what-you-get

[@tonykelpie]

Small comment. Life expectancy of someone who survives to 71 is a little more than 14 years.