Pension deferred or not

[OttoGraph]

If I take my pension now I will get £7k per year, still have 11 years until OAP pension. The prediction of pension is £10.500k I 10 years time

Not paying into pension any more

I not sure whether I should start drawing it and spending or saving some or to defer?

The lump sum is £7k either way

Do you need the pension now or are you still working?

I don't need the pension but not really working much, bit of casual for here and there

DB pensions are usually reduced somewhere between 3% and 5% for each year that you draw them early, so a 33% reduction for 10 years early sounds not unreasonable.

I'm slightly struggling to understand why you would draw a pension early if you don't need the money? If you put the lump sum in the bank you'd have to mindful that it doesn't lose value relative to inflation (bearing in mind inflation running at around 9%pa whilst interest rates are 5%pa or worse).

It's one of those decisions that's really very person-specific - it's not like it's a no-brainer to do one thing or another, it's really all about you, what other sources of income you have, what expenditure you have etc etc

The pension income will be taxable, which may have a bearing on your decision when added to other income sources.

Do you need the lump sum? Taking that reduces the annual amount.

How much do you think it would grow in the pension? The pension company obviously think that it will grow only 3% a year, but you can get more than that in a savings account now.

You need to factor in tax now also (would you still be working and earning over £12.5k plus drawing out £7k) - in which case that £7k will be £5.6k at most.

You also need to factor in tax at state pension age. As it stands the state pension is about £10k so £4.5k of the £7k would be taxable at 20%, meaning the £7k becomes £6k and the £10k would become £8.5k.

Taking £7k a year (if no tax implications) for 10 years is obviously £70k.
To earn £70k with an increase from £7k to £10k a year means you would have to live over 25 years to break even based on the pension growth forecast. This is why people usually reccommend people take the lesser sum sooner.

Further, if you don’t need that money then I would suggest it might be better to have it in your savings account earning a guaranteed amount (5% ?) and be available as part of your estate - if you die it won’t disappear it will be left according to your will.

I doubt you would regret having a fantastic holiday each year either.

GatesOfBabylon. The second half of your post is what’s I’ve been thinking. I would need to live until my 90s to break even and spending the money on holidays each year to enjoy would be good.

im not a risk taker and just looking for any sensible reason no to draw to early.

It’s think I’d enjoy spending the money niw than in the later years

Have you worked out your expected expenditure now and in retirement?
Have you worked out total income over each year?
How do they compare? Will you need the higher amount in retirement to meet your outgoings?

Have you checked your personalised forecast on gov.uk if you have earned a full SP?

Have you worked out your expected expenditure now and in retirement? No, as I don’t know what inflation will do over 10 years
Have you worked out total income over each year? I’ve worked out in 10 years I’ll get full state pension so £150+ more per week than I have now coming in
How do they compare? Will you need the higher amount in retirement to meet your outgoings? Again would depend on inflation, but with state pension starting I’d be better if

Have you checked your personalised forecast on gov.uk if you have earned a full SP? Yes

Will you receive a full state pension ?

https://www.gov.uk/check-state-pension

I believe you need 35 full years to receive a full state pension, you can check your record

https://www.gov.uk/check-national-insurance-record

You could take a tax free lump sum now & enjoy your life now !

None of know if we will live until our 90s

You could seek advice from a financial advisor

I believe everyone over 50 can receive free pension advice

If you look on www.gov.uk under pensions there are some suggestions of who to contact

Also look at Money Saving Expert website

Also ask your own pension provider

You can ignore inflation to some extent and work it out on today's figures.
Expenses are likely to increase by roughly inflation, the SP will and most DB pensions will.
Knowing your desired outgoings and income over the next 20 years will really help you answer your own question.

Please be careful quoting 35 years. It is not the case for many people, especially those who were in DB schemes (which the OP sounds like they are). I need much more than 35 for a full record and the only way of knowing for sure is to log on and get your personalised forecast.

Chewbecca

That is why I recommend that they take advice & making further checks, because everyone's circumstances are different

What are DB schemes?

I have over 35 years full NI stamp, how would my other pension affect my NI stamp contributions to my State pension?

DB = defined benefit. In other words a promise to pay an amount each year for life.

The alternative is DC, Defined Contribution where you save into a pot which you then use to buy an annuity (less common these days) or draw it down bit by bit during retirement.

Many people with DB pensions need more than 35 years NI for a full SP (me included). The amounts are calculated individually and you have to log on to gov.uk to know if you need to pay any more years for a full SP. Some people need over 40.

Many people with DB pensions need more than 35 years NI for a full SP (me included). The amounts are calculated individually and you have to log on to gov.uk to know if you need to pay any more years for a full SP. Some people need over 40.

why? How would your DB pension affect your state pension? Is this due to you contract out? I’ve never contracted out and never suggested that in any of my posts

A huge number of people don't even know less NI was paid as part of their DB pension. I didn't know what it meant tbh until recently (when I learned I need to pay 3 more years despite having paid NI consistently for 35yrs).

£203.85 is the most you can get
You cannot improve your forecast any more.

this is what my NI records show