NEVER Simple & Always A CATCH

 

There is a general rule in the pension sector……pensions are NEVER simple and there is always a CATCH with any action taken.

 

Nearly 7 million eligible Britons were today invited to top up there State Pension. In short, you can buy £1 a week of extra pension income at a cost of £890 (per £1 of income) up to a maximum of £25 per week extra pension income.

 

There is another way that seems to me to be far better which is to use your capital to defer taking your state pension.

 

So here goes……

 

You are just before age 65 and have £5,000 p.a. State Pension. You could buy an extra £25 a week / £1,300 a year for £22,250 giving a total income of £6,300 p.a.

 

However, instead of this, you apply the rule that pensions are “NEVER simple and there is always a CATCH” and you decide to postpone taking your state pension for 2 ½ years and you will end up in exactly the same position of £6,300 p.a. (plus whatever inflation increases have occurred by then).

 

All you now need to do is to provide yourself with £6,300 a year for 2 ½ years (£15,750). That brings the total cost down to £6,500 (30% cheaper).

 

You can see that this is much cheaper than buying the extra years…..something the Government hasn't exactly shouted from the rooftops about!

 

It’s a simple example to illustrate a far bigger point…… pensions are “NEVER simple and there is always a CATCH”

 

Is it any wonder there is so much confusion generated by the Government!