Retirees are boosting their state pension by £9,658 through FREE trick – how you can too
POT GOLD Retirees are boosting their state pension by £9,658 through FREE trick – how you can too
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THOUSANDS of retirees are boosting their state pensions by £9,658 for free.
Others are topping up their pots by hundreds of pounds each year, The Sun can reveal.
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Retirees can boost their state pensions by deferring when they take it
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The figures come from a Freedom of Information (FOI) request submitted to the Department for Work and Pensions (DWP) by The Sun.
Those in later life can boost their state pensions by delaying (deferring), with the extra money issued through higher weekly payments or as a one-off payment.
Those who reached state pension age before April 6, 2016, can take their extra state pension as higher payments or as a lump sum.
Those getting to state pension age after April 6, 2016, can take their extra state pension through higher weekly payments only.
The FOI figures obtained by The Sun reveal that all those who reached state pension age before April 6, 2016, deferred for at least 12 months and decided to take the top up as a lump sum received £9,657.65 on average as of November last year.
Those who reached state pension age on or after April 6, 2016, and deferred received on average £16.77 extra per week as of November last year - that's a top up of £872.04 a year.
The FOI also showed 2,092 people stopped deferring their state pension between April 1 and November 20 last year.
How deferring your state pension works
The current full new state pension is worth £230.25 a week while the full old-style basic state pension pays out £176.45 per week.
But, you have to actively claim it as it is not paid automatically.
Justin Corliss, pensions expert at Royal London, said: "One thing many people aren't aware of is that you need to claim state pension in the first place.
What are the different types of pensions?
"The DWP should get in touch with you no later than two months before you reach state pension age and will explain how to claim your pension.
"If you don't respond to the letter, then you won't get it."
Not claiming your state pension means you are, indirectly, deferring taking it.
You might want to do this if you're still healthy enough to work and don't need the cash boost.
You may also want to deliberately keep your income lower so you don't have to start paying income tax.
How much extra could you get?
The extra amount you get varies depending on when you reached state pension age.
If you hit state pension age on or after April 6, 2016, your payments increase for every week you defer, so long as you defer for at least nine weeks.
Your state pension rises by the equivalent of 1% for every nine weeks you defer, or 5.8% for every 52 weeks.
As an example, you get £230.25 a week under the full new state pension.
By deferring for 52 weeks, you would get an extra £13.35 a week (5.8% of £230.25), or £694.20 a year.
If you reached state pension age before April 6, 2016, you can take your extra state pension as a higher weekly payment or a lump sum.
However, anyone on an old state pension who deferred is likely to have ended their deferral period by now.
When you claim your deferred basic state pension, you'll get a letter asking how you want to take your extra pension.
You have three months from receiving that letter to decide.
Your old-style state pension increases every week you defer, as long as you defer for at least five weeks.
Your state pension increases by the equivalent of 1% for every five weeks you defer, working out as 10.4% for every 52 weeks.
As an example, if you get £176.45 a week under the basic state pension and defer for 52 weeks, you'd get an extra £18.35 a week (10.4% of £176.450 or £954.20 a year.
You can claim a deferred old-style or new-style pension online via www.gov.uk/deferring-state-pension/how-to-claim-a-deferred-state-pension.
Are there any negatives?
Deferring might seem like a no-brainer, but there are downsides and not everyone can do it.
First, you can't defer your state pension if you're on certain benefits including Income Support, Universal Credit and Pension Credit.
Full list of benefits disqualifying retirees from deferring a state pension
You cannot build up extra state pension during any period you are receiving: Income Support
Pension Credit
Employment and Support Allowance (income-related)
Jobseeker's Allowance (income-based)
Universal Credit
Carer's Allowance
Carer Support Payment
Incapacity Benefit
Severe Disablement Allowance
Widow's Pension
Widowed Parent's Allowance
Unemployability Supplement
You also cannot build up extra state pension during any period your partner gets: Income Support
Pension Credit
Universal Credit
Employment and Support Allowance (income-related)
Jobseeker's Allowance (income-related)
If you are claiming certain benefits you will need to let the Pension Service know if you want to defer.
Second, delaying your state pension will mean you won't receive any during the time you've postponed it.
This means it can take years to recoup the losses you've made during that time period.
Third, it can mean you're pushed over income tax thresholds, and fourth it might make you no longer eligible for benefits.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: "Make sure that deferring doesn't end up costing you money.
"For instance, it could push you over a threshold that means you end up paying more tax.
"It could also push your income above a threshold meaning you don't get a benefit that you otherwise would be entitled to.
"It's also worth thinking about how long it would take to make your money back by deferring.
"For instance, the full new state pension is currently worth just under £12,000 per year – if you defer for a year you have lost this income and it will take years before you recoup the full amount through the increased payments."
If you're not sure whether deferring is for you, you could speak to PensionWise, a free-to-use government service.
Or, you could hire a financial adviser. Just bear in mind you'll have to pay fees or an hourly rate of up to £350, says Moneyhelper.org.uk.
If you've not already claimed a state pension and can still work, you can also top up your pot by buying extra National Insurance years.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
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