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Deferrals offer opportunities

Over half of people willing to postpone state pension

Consumers’ willingness to defer taking the state pension is creating financial planning opportunities for advisers, according to Skandia.

People can receive higher retirement benefits by deferring the state pension and 57 per cent of individuals are keen to do so, according to a survey by Skandia of 400 consumers.

Senior manager of market development Colin Jelley says that the enhanced pension benefits available through deferral can be taken as a higher weekly payment or a lump sum.

The tax planning oppor- tunities for advisers occur when a lump sum is taken.

The enhanced weekly pension will be subject to income tax at the client’s normal marginal tax rate. The lump sum will also be subject to income tax but will only be taxed at basic rate even if the amount pushes the individual into the higher-rate bracket as long as their other taxable income is kept below the hig- her-rate threshold.

To ensure this, he says adv- isers should recommend clients swap income-producing investments for those which roll up the income into cap- ital such as single-premium insurance bonds.

He says the most effective way of reducing taxable income is to swap income-producing investments for those which roll up the income into capital such as single-prem- ium insurance bonds.

Jelley says: “The proposal in the Turner report to raise the state pension age may not be the political hot potato some have suggested. Research shows that many people would voluntarily consider delaying the state pension if it meant they would get more money. This creates tax planning opportunities for financial advisers, particularly as their clients are likely to be the type of people who can real- istically afford to defer their state pension.”

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