You think HMRC are inefficient?

You think HMRC are inefficient?

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Male applies online for his state pension to be paid from his 67th birthday.

Eventually gets 8 page letter from DWP.  Page 3 shows how his pension is made up - top line, Basic State Pension £113.10, followed by no less than 13 possible adjustments (I do look forward to the flat rate pension regime) all saying £NIL (I hate that - it should be just NIL) and ending with the chatty line "So the total amount of your State Pension each week will be £113.10".

So, what about the 20% uplift (being a pedantic accountant, I said actually it's 10.4% a year) for deferring taking the pension for 2 years?  Well, I assume that you did not take that option when you applied online.  I wasn't asked the question!

We call the 0845 number on the DWP letter to ask about his 20.8% uplift.  "Yes - £113.10 is correct for now.  You haven't been sent the "choice of" letter yet to ask whether you want to take a lump sum or the uplift.  That letter is usually sent out a couple of weeks after the first payment of pension, but don't worry, you will get paid the arrears if you choose the uplift."

What a daft system!  Guaranteed to make more work for DWP staff by having to send out two letters instead of one, to look at the case twice and to process varying payments over the first few pension payments.  Why cannot the "choice" be included in the online form, so that the uplift is paid from the outset?

Replies (9)

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By Moonbeam
22nd Aug 2014 12:07

I won't be deferring my pension

I initially thought what a good idea it would be to defer the pension payments. (Due in 6 years time)

Then I wondered whether I could trust the govt to honour its promises and pay me more later or to keep the books in order so I didn't have to argue with them later that their records were wrong.

Now I hear the rate they are paying in future will be lower for deferment and read Euan's posting.

I won't be helping the Treasury out by deferring. I will be observing the old maxim that money now is better than money tomorrow.

There will be so many old duffers exactly the same age as me I bet the money will run out at some stage.

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By Phelan
22nd Aug 2014 12:02

Makes me feel like banging my head against the desk, twice.

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By User deleted
22nd Aug 2014 12:05

Only ...

... twice!

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Euan's picture
By Euan MacLennan
22nd Aug 2014 12:14

Life expectancy of 10 years

You break even on deferment if you live for 10 years (based on current 10% uplift) after claiming the pension.  A man who is currently healthy at 67 would expect to survive to 77 - after that you are winning, assuming that there continue to be enough youngsters in work to fund the state pension!

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By User deleted
22nd Aug 2014 12:32

Need to look at each case ...

... what if you are a 40% tax payer on say £50k and carry on working until 70, at which point your private pension is say £25k.

I believe also you can take the deferred part as a taxable lump, rather than as an enhanced pension, in the above scenario it would be taxed mainly if not totally at 20% rather than 40%.

Everyones circumstance is different and you need to see an IFA to decide what is best for you (and may be do one of those tests that tell you when you will die!).

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By The Innkeeper
22nd Aug 2014 13:01

Hmm

I will be taking mine at the earliest opportunity as to use the correct terminology I have an impaired life expectancy!

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By User deleted
22nd Aug 2014 18:23

Title wrong!!

HMRC and efficiency - how these are connected??

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By User deleted
22nd Aug 2014 21:28

Erm ...

... title says HMRC and inefficient - very connected.

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By Marion Hayes
22nd Aug 2014 21:27

Lump sum taxability

State pension is one of those all or nothing lump sums.

If without it you are not taxable - tax due nil

If without it taxable 20% - all taxable 20%

If taxable 40% - all taxable 40%  etc etc

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