State Pension is given by the government to people who have contributed years of National Insurance (NI) payments. The sum is paid out once every four weeks to UK pensioners who receive different amounts dependent on their years of contribution. The most a pensioner can currently receive on the basic State Pension is £134.25 – after having 30 or more eligible years in NI contributions.
Those who receive the new State Pension could get up to £175.20 per week for a minimum of 10 years in NI contributions
But there is one simple way Britons may be able to increase their entitlement amount through the State Pension system.
By delaying when the State Pension is claimed, people are likely to receive a higher weekly sum, as the pension is linked to inflation.
If a person can afford to defer, the benefits in the long-run could be substantial, as the pension grows.
For those who reached State Pension age on or after April 6, 2016, the pension amount will rise for every week it is deferred – so long as this is for at least nine weeks.
This works out at an increase of the equivalent of one percent per nine week deferral period.
As a total this works out to be just under 5.8 percent for every 52 weeks deferred.
The extra amount is then paid with a person’s regular State Pension payment.
On the basic State Pension system, people can also receive a one-off lump sum payment if deferring the pension for at least 12 months.
This includes interest of two percent above the Bank of England base rate.
It is worth noting, for those interested in this option, that the Bank of England base rate is currently at a record low, due to the impact of COVID-19.
Those who wish to claim a lump sum payment must also note they will be taxed at their current rate.
If a person has already begun claiming the State Pension, but then later decides they do not need the income at that particular time, a choice can be made to stop receiving this.
However, this option can only be deployed once during retirement, so pensioners should think carefully about their options.
The State Pension is automatically deferred if it is not claimed.
This is because claiming the State Pension is not an automatic process, and Britons are required to pursue the sum themselves.
The government advises those who wish to find out more about increasing pensions to speak to an independent financial adviser.
Published at Tue, 09 Jun 2020 06:30:00 +0000