THE VERY SAVVY SAVERS GETTING £30,000 A YEAR from the state State pension
THE British state pension notoriously pays only a bare bones sum to live on in retirement. The full rate of £9,630 a year — or £185.15 a week — barely covers the everyday essentials these days, let alone a comfortable standard of living.
But did you know some savvy pensioners receive more than THREE TIMES as much as this after legitimately boosting their retirement payout?
Money Mail can reveal that ten lucky pensioners received an astonishing £30,100 annual payout in the 2021/22 tax year — or more than £580 a week.
The official numbers are contained in the answer to a Freedom of Information request submitted by Money Mail.
This year (the 2022/23 tax year that ends in April) those ten lucky pensioners have been receiving at least £598 a week — putting them on track for more than £31,096 a year.
The amount they get is rising because their payout increases every year under the state pension triple-lock guarantee — just like everyone else’s.
The triple lock pushes up the state pension by the highest of inflation (as measured every September), earnings growth or 2.5 pc. Last September, inflation was 10.1 pc. So from April, the ten pensioners are each in line for a £3,140 minimum increase to their annual payment. That will take their state pension income to £34,236 — or £658 a week.
By contrast, retirees receiving the ‘full’ flatrate state pension (introduced in April 2016) will get a boost of £972 a year, taking their annual income to a maximum of £10,600.
So how on earth are these ten pensioners able to coin in so much from the state?
PERKS OF THE OLD STATE PENSION
IN 2016, the Government rolled out a ‘flatrate’ system for the state pension, where anyone with 35 years’ worth of National Insurance contributions receives the full new payout of £185.15 a week.
This is paid to anyone reaching pension age after April 6, 2016, while those who reached it before that date receive the ‘ basic’ state pension (plus any earnings- related top- ups, see below).
The basic pension, also known as the ‘old’ state pension, pays up to £141.85 a week, or £7,376 a year.
But complicated legacy rules mean very few people receive those amounts exactly.
Nearly 10 million people, equivalent to three in four pensioners, still receive the old state pension, which will be phased out entirely over time.
Four million — or one in three — received more than the ‘flat rate’ £179.60 a week payment in the 2021/22 tax year.
At the other end of the scale, around 27,000 pensioners — many of them women — are paid less than £1 a week as they did not build up enough entitlement to the state pension during their working lives.
BOOSTS FOR A SUPERSIZED PAY
ANYONE on the old state pension could build up entitlement to extra income. Many were entitled to an additional earnings-related element of the state pension. This is the first boost the lucky ten used to ‘supersize’ their incomes.
Most people receive this extra pension, known as ‘Serps’ (state earnings-related pension scheme), on top of their basic payment.
Some will receive only a few pounds extra. But others could be receiving as much as the full basic pension of £141.85 plus a maximum Serps pension of £185.90.
This adds up to a total of £327.75 a week, or £17,043 a year.
Between 1961 and 1975 you could also build up a ‘graduated retirement benefit’, which takes the total a few pounds higher.
The second big boost came from deferring the date at which they started receiving the pension.
Doing this means you give up some income in the years after hitting state pension age (currently 66). But when you do start receiving it, the amount is permanently higher.
Your state pension increases for every week you defer, as long as it’s for at least nine weeks after you have reached state pension age.
Under the new system, your state pension rises by 1 pc for every nine weeks you defer — amounting to 5.8 pc for every year.
But under the old rules, the basic pension increased by 10.4 pc for every year you deferred. This meant someone on a basic pension plus Serps of £300 a week would be able to boost their weekly payout to £580 by delaying their start date by nine years.
Steve Webb, a former pensions minister and architect of the new state pension, says the deferral system is designed to be a ‘fair deal’ which repays pensioners for the years of state pension they have forgone.
Mr Webb, who is now a partner at consultants LCP, adds: ‘Someone with a long working life on a good wage under the old system, who put off taking their pension for several years, could have a state pension running into hundreds of pounds a week.’
Those in good health stand to gain most, because they’ll receive the enhanced pension for longer.
However, low earners and those in poor health typically won’t be able to defer payments and won’t have made large contributions towards their state pension.
Caroline Abrahams, of charity Age UK, says inequalities in payouts show there is still some way to go until the state pension reaches an adequate level.
She says: ‘While a small number of people under the old system are paid high amounts, on average, amounts received are lower than for those reaching state pension age now. This is especially true for older women who, on average, receive below £8,000 a year, with some receiving much less.’