I deferred my state pension. How will it affect benefits for me and my wife?

I deferred my state pension. How will it affect benefits for me and my wife?

In October 2015 I became eligible to claim my state pension, but deferred taking it. Now after four years I am considering the options of taking the lump sum or the extra weekly pension. 

What I have not been able to establish is what percentage of the extra pension gained by deferment my wife will be able to inherit should I predecease her after I start receiving it. The online DWP information suggests it will be 100% of the extra pension, but this is not clear enough for me to make a final decision.

I’m sure you will appreciate that as with any other pension or annuity arrangement, it is important to know the full benefits for me and those that will continue for my wife. Inheriting the extra pension in full changes the options significantly.    

I have written to the DWP on two occasions in 2018 and 2019 requesting clarification, but without reply. Can you resolve this query?

Michelle Cracknell
Fri, 02/21/2020 – 13:25

From
TB/via email

The rules for inheriting pensions depends on whether you became eligible for the state pension under the old system (before April 2016) or the new system (from 6 April 2016).

As you reached state pension age in October 2015, the old rules will apply to you. This means your wife should be eligible to inherit 100% of your extra state pension if you start claiming it.

If you die before you start claiming your state pension your wife will inherit the lump sum.

For people who reach state pension age after April 2016, the state pension will normally be based on the individual’s own National Insurance contributions only.

The only exceptions are if the individual chose not to pay Class 2 National Insurance contributions or if the married women’s reduced rate was elected. A widow may inherit half of their Protected Payment if they were married or in a civil partnership before 6 April 2016.

Michelle Cracknell is the former chief executive of the Pensions Advisory Service

Do you have a money question for our panel of experts?

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Can I claim my late husband’s state pension? I paid the married woman’s stamp

Can I claim my late husband’s state pension? I paid the married woman’s stamp

My husband died in July 2017 aged 68 in receipt of a full state pension. We married in 1973 and I worked full-time until 1977. I am 64.

I read online that I may be entitled to some of his state pension if I paid the married woman’s stamp before 1977. Is this so, and if it is how do I find out? I have done an online pension forecast for myself that at present comes up at £168.60.

Michelle Cracknell
Wed, 02/19/2020 – 11:48

From
MV/via email

From your email, it appears that your husband reached state pension age before April 2016 but you have not reached state pension age yet.

There was a concession when the new state pension was introduced in April 2016, but it was for women who paid the married woman’s stamp after 1977.

The concession was that it was possible to increase the amount of basic state pension if the woman’s basic state pension is less than £129.20 per week and where the late husband had enough National Insurance contributions to qualify for a full state pension. Unfortunately, I do not think this applies to you as you stopped paying the married woman’s stamp in 1977. 

As your state pension forecast is for £168.60, it appears that your National Insurance record takes you over £129.20 per week anyway.

For general information, when this applies, the increase happens when you are widowed or when you claim your state pension, whichever is later. It is also important to note that this increase does not apply if you were widowed before state pension age and you remarried (or formed a new civil partnership) before you reached state pension age.

You may be entitled to inherit half of any SERPS pension that your late husband was receiving when he died.

Michelle Cracknell is the former chief executive of the Pensions Advisory Service

Do you have a money question for our panel of experts?

At Moneywise, we have a panel of top experts to help with your money and investing questions. If you have a tax issue that’s keeping you awake at night, a question about investing that you’ve always wondered but been too shy to ask, or even need a full money makeover for free, we’d love to hear from you.

If you have been treated unfairly by a firm send the details to Moneywise’s Fight for your Rights and we could take up the fight for you.

Email fightback@moneywise.co.uk

If you have a question about your investments or investing in general, put it to our Investment Doctor.

Email editor@moneywise.co.uk

If you have a question about your personal finances – anything from tax to state pensions, inheritance tax, property sales and more – write to our Ask the experts panel.

Email advice@moneywise.co.uk

Would you like a full money makeover? We will arrange a free one-to-one meeting for you with an FCA-regulated independent financial adviser worth over £2,000.

See Moneywise.co.uk/money-makeover for more details.

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Inflation jumps to six-month high in more bad news for savers

Inflation jumps to six-month high in more bad news for savers

Inflation has reached a six-month high, pushed up by higher petrol prices

Laura Miller
Wed, 02/19/2020 – 11:44

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Inflation jumped unexpectedly to 1.8% in January due to higher fuel costs, putting it at the highest rate since last July.

Rising consumer prices for water, electricity, gas and other fuels were the biggest contributors behind the 0.5% increase from December.

As well as paying more for goods and services, an increase in the Consumer Prices Index is a blow for cash savers trying to preserve the value of their nest eggs.

Data from Savings Champion shows only 50 accounts match or beat inflation, including accounts for existing customers only, down from 492 last month.

All require savers to lock away their cash for a fixed term. Nationwide’s Flex Direct account is the best buy on the market which pays 5% interest for 12 months. The Classic Plus account from TSB did rank second, paying 3%, but has just slashed its rate in half to 1.5%.

Interest rates on savings held in bank accounts have been rock bottom since the financial crisis, meaning the spending power of cash languishing in them is slowly eroded away by rising prices for goods and services.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, says: “Savers have been hit with a double-whammy of falling savings rates and rising inflation. The impact of cuts in savings rates over the past six months has been softened by lower inflation – so now inflation is on the rise, we’re set to feel the pain of the cuts far more acutely.

“It means we need our cash to work as hard as possible if we’re going to stand a chance of beating inflation.”

Coles recommends savers see their nest egg as a number of slices of cash – depending on what it is for, starting with an emergency fund of three to six months of expenses in a competitive easy access account.

“After you could fix some of it for one year and earn 1.65%, some for two years at 1.8%, and some for five years at 2.1%,” she says.

“If you’re putting the money aside for 5-10 years or more it’s worth considering investments. These will rise and fall in value over the short term, but over the long term they have the opportunity to take advantage of growth and income from the stockmarket and stand a better chance of beating inflation.”

However, market watchers predict the jump in inflation is temporary, and expect no reaction from the Bank of England.

“This rise in inflation against expectations is mostly due to energy and oil prices, which we expect to wash out of the numbers in coming months as recent data has shown,” says Hinesh Patel, portfolio manager at Quilter Investors.

Robert Alster, head of investment services at Close Brothers Asset Management, adds Brexit still calls the shots on interest rate decisions or big budgetary moves.

“The Bank of England will be trepidatious about bold monetary decisions until the scale of this post-EU disruption is known,” he says.

“A similar approach is expected to be taken by the new Chancellor on 11 March. Rishi Sunak is likely to use the Budget to announce a welcome boost to longer-term investment, but abide by the fiscal rules for shorter term spending until the fog has cleared.”

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