State pension age Britons could get 5.8% boost ‘for rest of their lives’ – is it worth it?

State pension: Martin Lewis explains if you’re entitled to more

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That’s not to say that they have to claim it for when they reach state pension age though. It is possible to defer the payment, sometimes known as delaying the state pension.

There are various reasons why a person may decide this is or isn’t the right decision for them.

For some, it may be they defer the payment with a view to increase the amount they get when they do claim it.

Deferring taking the state pension could deliver thousands of pounds in extra retirement income for those who live to a ripe old age, analysis from AJ Bell shows.

For those who reach state pension age on or after April 6, 2016, deferring the state pension for 12 months will mean the person gets a 5.8 percent boost to the value of their payment when they start to draw it.

Assuming the state pension increases by 2.5 percent each year, they could be in ‘profit’ from a 12-month deferral after 15 years, AJ Bell said.

According to the Office for National Statistics (ONS), the average life expectancy at the age of 66 is 19 years for a man and 21 years for a woman.

Health, income and lifestyle will all impact on people’s decision on whether state pension deferral is the right option, AJ Bell said.

Tom Selby, senior analyst at AJ Bell, commented: “For many people the state pension age will be viewed as something set in stone which cannot – or perhaps should not – be shifted.

“However, if you are in good health and have enough income to support your lifestyle in retirement then deferring receipt of the state pension could be a savvy move.

“Someone who defers taking their state pension by 12 months would get a 5.8 percent boost to their income for the rest of their lives.

“That is equivalent to around £10.41 a week for someone entitled to the full £179.60 a week flat-rate state pension in 2021/22.

“If we assume the state pension grows by 2.5 percent a year – the minimum level of increase under the ‘triple-lock’ – it could take 15 years for the total retirement income they received to exceed what they would have got if they hadn’t deferred.

“From that point onwards, every year of state pension the person receives will deliver bonus income as a result of the deferral.

“If, for example, they lived until age 90, they could receive over £7,000 more in retirement income by deferring the state pension by 12 months.

“If they reach their 100th birthday, the decision to defer could pay off to the tune of £18,000.”

Mr Selby turned to address considerations which those considering deferring the state pension may want to make.

“Although deferring the state pension will be a good option for some, it will not be possible or desirable for others,” he said.

“Those who need the money as soon as possible might be less tempted by the increased income they could receive in the future, while for those with underlying health conditions the likelihood they live long enough to benefit from deferral will be reduced.

“People also need to consider how a higher state pension payment might interact with other means-tested benefits they are currently entitled to.

“However, in lots of cases the generous deferral rate on offer means it should at least be considered when devising your retirement income strategy.”

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