The following article was first posted on 22 September

George and Mildred disagree on when to claim the State Pension.

George has already claimed and is in receipt of £638.20 each month which adds £8296.60 to their annual household income. Because he has other income from his Income Drawdown account he pays tax at a rate of 20% on his State Pension.

George remembers being advised to claim immediately rather than deferring. Although delaying claiming his State Pension would add 1% to his pension for every 9 weeks delayed, he was told it would take around 20 years to recover the income not taken. He might not live long enough to reap the financial reward.

Mildred has a different take on it.

She read the Booming Lives bulletin last week. She intends to live a long life (her mother is still going strong at 95). She is concerned about outliving their income. If she can’t buy “deferred” annuities in the UK then the next best insurance against living a long life would be “deferring” her State Pension.

Unlike George, she has done the maths herself:

1. If she gives up the first year’s income from the State Pension – which for her would be £8296.60 – she will get an extra £479 per annum for life. The increase amounts to an “annuity” rate of 5.8%, better than any rate currently available in the annuity market.

2. She will recover the £8296.60 in just over 17 years by the time she is 82.

3. She is currently earning a better income from her book business than expected and therefore they can afford to delay her State Pension. If she claimed her State Pension now, she would lose 20% in income tax.

4. Unlike George, she will have limited income from other sources in her 80s and 90s and will rely heavily on the State Pension at that time. She expects her Personal Tax Allowance to more than cover her higher State Pension and therefore “deferring” is also tax efficient.

George is grumpy. As a retired accountant he has always prided himself on his ability to analyse money matters and come to sensible decisions. Perhaps he made a mistake in “taking the money” as soon as available from the State. However, the rationale for deferring is much clearer for Mildred than it was for him. Her mother’s genes, her income from her book business and the fact that her higher State Pension post age 82 will be received tax free do not apply to him.

His mood is quickly lightened by a sense of pride in how financially savvy Mildred has become.