Is your state pension paid automatically when you reach state pension age?

[HannahinHampshire]

Just that. I’m still a few years away from State Pension but do they write to you a few months in advance? Or do you have to contact them? Thank you!

They will send you a reminder letter, but you have to formally apply. There's a firm on the .gov website.

I don't think so.
I'm sure I've seen news reports lately that there's a backlog and some new retirees are struggling financially.

Form!

Yes, you have to apply. I assume you get a letter inviting you to do so. You can defer it if you want to (eg if you’re still working) and claim later (you get more per week if you defer), so you have to confirm whether or not you want to start taking it when you reach state pension age for this reason.

Thank you. I’ve got a decent private pension pot so won’t be relying solely on state pension. Will be sure to look at the government website in plenty of time!

They should contact you 3 months before pension age. If they don't you need to contact them.

They will contact you. I found it all quite straightforward and efficient.

You have to apply for it. They usually write to you but I've come across people who haven't received the letter.

You can claim up to 4 months in advance.
www.gov.uk/new-state-pension/how-to-claim

If you could defer taking the state pension, the amount increases:

Your State Pension will increase every week you defer, as long as you defer for at least 9 weeks. Your State Pension increases by the equivalent of 1% for every 9 weeks you defer. This works out as just under 5.8% for every 52 weeks.

Whether it's worth doing this depends on your circumstances.

You can also apply after you retirement date. I was going to defer, but changed my mind after 2 months, due to an unexpected change in circumstances, so I was given the option to have s slightly higher amount, or backdate to my retirement date and have a lump sum of the missed weeks pension.

@eightlivesdown

If you could defer taking the state pension, the amount increases:

Your State Pension will increase every week you defer, as long as you defer for at least 9 weeks. Your State Pension increases by the equivalent of 1% for every 9 weeks you defer. This works out as just under 5.8% for every 52 weeks.

Whether it's worth doing this depends on your circumstances.

It makes no real sense to defer, it’s neutral.

It might make sense if you are still working because the pension will be taxed at your marginal rate. Taking (a higher) pension once you've stopped working will mean it isn't taxed if it's your only income, or it might be taxed at a lower rate depending on the amount of your other income.

@eightlivesdown

It might make sense if you are still working because the pension will be taxed at your marginal rate. Taking (a higher) pension once you've stopped working will mean it isn't taxed if it's your only income, or it might be taxed at a lower rate depending on the amount of your other income.

Except you never actually catch up the forgone income. Deferring has been changed so it no longer pays. It sounds sensible, but in reality it isn’t

Except you never actually catch up the forgone income. Deferring has been changed so it no longer pays. It sounds sensible, but in reality it isn’t

I don't think I understand this.

To take a stark example, if you're carrying on in a well paid job past pensionable age and you start drawing your pension as soon as you qualify, then you'll only get 60% of it to start with because it will be taxed at 40%.

If you defer until you finish working then you'll get paid more state pension each year, and it will be probably be taxed much less (basic rate), or perhaps not at all, depending on what other arrangements you have. (I'll have very little taxable income, most of my savings are in an ISA from which I'll draw a tax-free income). Over the course of your remaining life you might in total ending receiving slightly less state pension than you would in the first scenario, but net you'll get more because you'll pay less tax.

Or have I misunderstood something?

Agree with this.

You could also get more gross pension depending on how long you live; it takes 17 years to break even on gross pension. 17 years or less to break even on net pension, depending on your tax position (e.g. 10 years if you move from 40% to 0% tax).

Basically, it depends on your situation - health (life expectancy) and your tax rate whilst working and after you stop. And your mentality, whether you'd prefer to start the pension when working and not needing the money, or a larger amount once you've stopped working and will live off it.

@eightlivesdown

If you could defer taking the state pension, the amount increases:

Your State Pension will increase every week you defer, as long as you defer for at least 9 weeks. Your State Pension increases by the equivalent of 1% for every 9 weeks you defer. This works out as just under 5.8% for every 52 weeks.

Whether it's worth doing this depends on your circumstances.

If you have a full state pension and defer it for a year, you will be around £500 a year better off, but having foregone a full year’s pension, it will take approx 17 years before you break even. How many people live for a further 17 years after retirement?

@MurielSpriggs

Except you never actually catch up the forgone income. Deferring has been changed so it no longer pays. It sounds sensible, but in reality it isn’t

I don't think I understand this.

To take a stark example, if you're carrying on in a well paid job past pensionable age and you start drawing your pension as soon as you qualify, then you'll only get 60% of it to start with because it will be taxed at 40%.

If you defer until you finish working then you'll get paid more state pension each year, and it will be probably be taxed much less (basic rate), or perhaps not at all, depending on what other arrangements you have. (I'll have very little taxable income, most of my savings are in an ISA from which I'll draw a tax-free income). Over the course of your remaining life you might in total ending receiving slightly less state pension than you would in the first scenario, but net you'll get more because you'll pay less tax.

Or have I misunderstood something?

If you work for a further 5 years before you take your pension, your pension will increase to £12047 a year. Assume you live a further 10 years that’s a total of £120470 in state pension. If you draw it on retirement and live for 15 years, you will receive £140085. However, if you have to pay 40% tax for the 5 year whilst you’re still working, this would drop to £121407 over the same 15 years. So to benefit from deferring your pension for 5 years you have to live for more than 15 years after your state pension age before you stop making a loss. Assuming a retirement age of 67, you’d be 82, which is just below the average age most of us live to. You’d be better taking your full pension at retirement age and dropping a day or so at work, which in itself will likely give you a better quality of life in your 70s!

Thank you for the maths @Soontobe60 , your username I'm guessing explains why you're so knowledgeable

This seems to be crying out for a spreadsheet ...

@MurielSpriggs

Thank you for the maths *@Soontobe60* , your username I'm guessing explains why you're so knowledgeable

This seems to be crying out for a spreadsheet ...

Haha! I spent months working out if I could afford to retire - I’m a teacher - which involved both my State and teachers pension, including the optimum time to take each pension.