AN UNUSUAL move could boost your state pension by as much as £665 every year in retirement.
Planning for your golden years means looking at your budget and how much cash you’ll have to work with.
But many of those approaching retirement age don’t realise there are other options to help give your pot an increase.
Pension experts at Just Group explained that one way is to actually defer your state pension payment for a year.
The team found that hundreds of those aged 55-64, who will soon be making key pension choices, don’t even know deferral is an option.
Stephen Lowe, group communications director at Just Group said: “Deferring can be good option for people who don’t need the income immediately – perhaps because they are still working or have other sources of cash – so it is disappointing a quarter of those approaching state pension age don’t know about the option.”
Despite it being a relatively unknown way to boost your savings, it could actually give you an additional £664.58 worth of payments a year.
That’s because when you hit 66, the current pension age, you have to claim the benefit – it won’t just land in your bank account automatically.
If you resist claiming, it will increase by 1% for every nine weeks you defer.
Over a 52-week period you’d get just under 5.8% extra.
If you’re entitled to the full new state pension amount of £11,501 a year, which kicks in from April, you could get an extra £12.78 for every week you defer.
Recently, The Sun spoke to a woman who boosted her retirement income by £1,014 annually by paying voluntary National Insurance Contributions (NICs) and delaying when she took her State Pension.
Deferring could be a smart option if you don’t need the money straight away, and it’ll increase how much you get when you do decide to finish working.
However, you should bear in mind that by deferring you could affect your entitlement to other benefits such as Pension Credit.
And, only defer if you can actually afford to live without your pension or want to continue working.
Also, it’s important to note that you could be taxed on the deferred payments so make sure you do the maths first.
Of course, it’s important to remember that if you’re not entitled to the full state pension amount you could get less than £665 by deferring.
Under current rules, you need 35 years’ worth of National Insurance (NI) credits to get a full new state pension.
Many people have gaps in their NI record due to time spent out of the workforce – raising children for example.
It’s important to get a state pension forecast which will tell you how much you are on track to get and let you know if you have any gaps in your National Insurance record.
If you do have gaps, it’s a good idea to check with the Department for Work and Pensions to see if you qualified for a benefit during that time which comes with a National Insurance credit – for example Child Benefit and Universal Credit.
And if this is the case, you may be able to backdate a claim.
But if you can’t get a free NI credit, you could pay to fill in the gaps in your record too.
You can usually buy voluntary NICs for the previous six tax years but there’s a current opportunity for those retiring under the new state pension system (post 2016) to fill gaps going back to 2006.
This scheme is set to finish in 2025 so there’s still time to plug those holes.
It’s important to note that before making voluntary contributions, you need to get a pension forecast and speak to the Government’s Future Pension Centre.
The body will be able to tell you whether it’s worth you paying for extra qualifying years, as it may not be beneficial for everyone.
DON'T know where to start? Here are some tips from financial provider Aviva on how to get going.
You’ll have to apply for the state pension – it won’t just be paid automatically once you’ve reached retirement age.
Around two months before you reach retirement age, you should get a letter from the Department for Work and Pensions (DWP) telling you what you’ll qualify for.
You can begin applying for your state pension from three months until you reach retirement age, even if you haven’t received the letter.
You can apply online at the gov.uk website for England, Scotland and Wales – if you haven’t got your invitation letter you’ll need to contact the DWP first to ask for an invitation code.
You will then need:
If you live in Northern Ireland then you need to apply on the nidirect.gov.uk website.
If you start your claim in the first 12 months after you reach state pension age, you can ask that the claim be backdated to when your entitlement started.
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