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Where Taxpayers and Advisers Meet

Deferred Pension

Joined:Tue Nov 28, 2017 3:03 pm
Deferred Pension

Postby NonDom41 » Tue Feb 18, 2020 10:38 pm

The facts are as follows :

A lifelong native UK-resident (born before 1952) has not claimed his state pension yet - he has voluntarily deferred his pension. This means he was entitled to pension payments for past years which have not been paid to him. On the other hand, he also owes HMRC national Insurance contributions from the past.

The question is :

Can he offset these owed national insurance contributions against the deferred pension payments of the past ? This would mean that he does not have to pay the owed contributions because they can be offset against the pension payment of arrears, i.e. he will receive the pension payment of arrears minus the owed NI contributions.

Correct ?

Joined:Tue Feb 27, 2018 8:34 pm

Re: Deferred Pension

Postby ben_power » Fri Mar 27, 2020 12:10 am


The state pension is based upon his NI history so if he didn't make them then his state pension would already reflect that.

Something I see a lot (as a financial adviser) is people deferring the state pension. Sometimes this is sensible but not for a long period of time. If you defer the pension for a year you will of course receive a higher amount the next year should you choose to take it and again subsequently... however, you will be a year of income down. For example... and we'll use the full state pension of c£8,700. You reach state pension age and decide to defer it a year and get the 5.8% (£505) uplift to £9,205 and then again for another year so it rises to £9,739. However, whilst you are now £1,038 better off per year your already £17,905 down having not taken the income. You would have to live over 17 years before you were better off, defer it for 3 years and the picture get worse.

This does of course not factor in tax which can be a motivator for deferring for a year, sometime 2 but after that it's rare you wouldn't take it.

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