Boost Your State Pension by £694: For thousands of pensioners in the UK, there’s a rule that’s little known, but it could make a significant difference to their income. Men born on or after April 6, 1951, and women born on or after April 6, 1953, can claim the new state pension when they reach the age of 66. Interestingly, the pension doesn’t automatically start, and those who defer it for a short period can benefit up to £694 extra each year.
Many people don’t know that instead of claiming their state pension, they can defer it. Even a delay of just one year increases their weekly payment forever, which can provide greater financial security in retirement.
How to benefit from pension deferral
According to the rules, if a person reaches State Pension age on or after April 6, 2016, their pension amount increases by 1% for every nine weeks they defer pension payments. Waiting for a full year increases this amount to 5.8%, equivalent to approximately £694.20.
Currently, the full rate of the new State Pension is £230.25 per week. If someone defers it for 52 weeks, they can receive an additional £13.35 per week. This increase becomes permanent for life, resulting in hundreds of pounds of additional income each year.
Not Everyone Gets the Full Rate
Although the additional benefit of £694 is attractive, not all pensioners are eligible. 35 years of National Insurance contributions are required to receive the full pension amount, while at least 10 years entitle them to the minimum payment. Those with incomplete records receive a reduced amount, but they also receive the deferral benefit proportionately.
This year, the government provided another relief to pensioners. The state pension has been increased by 4.1%. Those receiving the full new state pension will now receive an additional £470 annually. Meanwhile, the weekly amount for those receiving the basic state pension has increased from £169.50 to £176.45, benefiting them by approximately £360 annually.
Government Claim: Improving Pensioners’ Living Standards
The Department for Work and Pensions (DWP) states that with these increases and deferral options, the government is committed to protecting the incomes of the elderly. Pensions Minister Torsten Bell said the government’s goal is to ensure that “every pensioner lives with dignity in retirement.”
He stated that an additional £7.84 billion is being spent on state pensions this year. Additionally, £26 billion has been invested in the NHS, reducing treatment waiting lists for five consecutive months.
The Importance of Timing in Retirement Planning
For those approaching the age of 66, the decision is crucial: whether to claim their pension immediately or defer it for a while. This decision depends on health, other income sources, and personal financial plans. Some people will be relieved to receive an immediate payment, while others will prefer a higher pension for life.
It’s important to note that the pension does not start automatically. About two months before reaching State Pension age, a letter arrives asking whether you want to claim immediately or defer it. Making the right choice can generate up to £694 in additional income each year.