Playing the waiting game to boost retirement income
A QUARTER of Britons approaching retirement are unaware that they do not have to draw their state pension at 66 but can defer taking it and get more money later.
As growing numbers are working later in life to make ends meet, state pension deferral may become more popular but only if people know about it.
Deferral can work well for older workers who still earn a decent salary and want to push on beyond the age of 66, as drawing the state pension on top of their income could push them into a higher tax bracket.
It may be better to delay and not draw their state pension until they stop working. They will also get more money in return for waiting.
Those who reach retirement age after April 6, 2016, can get 1 per cent extra state pension for every nine weeks they defer taking payments – this is equivalent to nearly 5.8 per cent for a full year of deferral.
With the triple lock boosting the full new state pension to £11,502 a year from April, someone who defers for just one year will get around £665 extra pension income for life.
However, one in four people aged between 55 and 64 do not know deferral is an option, according to new research from retirement specialist Just Group.
Just Group’s communications director Stephen Lowe said deferring can have tax benefits for those people who do not need their state pension immediately. “So it is disappointing that a quarter of those approaching state pension age don’t know this,” he added.
The downside is that it takes years to recoup the sacrificed pension. Deferral therefore suits those in better health with a higher life expectancy.