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State pensioners could boost their sum by completing a specific action when it comes to their payments. The state pension age is currently 66, but not everyone will choose to retire at this age.
Even if a person does choose to retire at 66, they may not be in immediate need of their state pension.
For those in these circumstances, deferring a state pension could be a good way to secure a valuable income boost.
People do not get the state pension automatically, as they will have to claim it.
However, the process of deferring involves delaying the receipt of a state pension – which will be done automatically if a person does not claim.
Deferring the state pension could increase the payments a person gets when they eventually decide to claim it.
The rules differ according to when a person reached state pension age, it should be noted.
For those who reached state pension age on or after April 6, 2016, the state pension will increase every week they defer, as long as they defer for at least nine weeks.
The new state pension increases by the equivalent of one percent for every nine weeks, working out as just under 5.8 percent for every 52 weeks.
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So, for example, if someone receives the current full new state pension of £185.15 weekly and defers for 52 weeks, they will get an extra £10.70 per week.
The extra amount is paid out on top of a person’s standard state pension payments.
If someone reached state pension age before April 6, 2016, their state pension increases by the equivalent of one percent for every five weeks of deferral.
Ultimately, this works out as 10.4 percent for every 52 weeks of a claim delay.
If someone receives the full basic state pension of £141.85 a week, by deferring for 52 weeks, they will get an extra £14.75 per week.
For basic state pension recipients, they can either get their extra state pension as either:
- Higher weekly payments
- One-off lump sum.
After deferral ends, and a person claims their state pension, they could get even more.
This is because the extra amount usually increases each year based on the Consumer Price Index (CPI) level of inflation.
It will not, however, increase for some people who live abroad.
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State pension increases only occur for those resident in the following countries:
- The UK
- European Economic Area (EEA)
- Gibraltar
- Switzerland
- Countries with a social security agreement with the UK (but not Canada or New Zealand).
People should be aware they cannot build up extra state pension in certain circumstances. This includes if someone is receiving specific benefits or tax credits.
Britons cannot build up extra state pension during any period they get:
- Income Support
- Pension Credit
- Employment and Support Allowance (income-related)
- Jobseeker’s Allowance (income-based)
- Universal Credit
- Carer’s Allowance
- Incapacity Benefit
- Severe Disablement Allowance
- Widow’s Pension
- Widowed Parent’s Allowance
- Unemployability Supplement.
For those who reached state pension age before April 6, 2016, tax credits or Universal Credit payments may be reduced if they choose to take their extra state pension as a lump sum.
Deferral, however, is not right for everyone and it is important to consider the matter carefully before taking action.
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