Retirement age: Brits can increase the amount they receive by deferring payment | Personal Finances | Finance
Since people do not automatically receive state pensions but must actively claim them, they do not have to do anything to defer payment. On the contrary, they can just leave the state pension in place and it will increase, as long as it is delayed for a period of time.
People should receive a letter about two months before they reach the age at which they can apply for their state pension explaining their options.
Once a person decides to delay paying their state pension, the length of time they delay dictates the returns they will get.
There is a limit between two systems of deferral of pensions. People who have reached the legal retirement age (ASP) before April 6, 2016 are treated differently from those born on April 6, 2016 or after.
For those in the old camp, reaching the SPA by April 6, 2016, their state pension will increase each deferred week, as long as the deferral lasts at least five weeks.
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Their state pension will increase by a considerable percent every five weeks deferred.
This equates to 10.4 percent each year.
This means that for those who are entitled to the full basic state pension of £ 137.60 per week, the postponement of the state pension for one year means that they will receive an additional £ 14.31 per week when ‘they decide to apply for their state pension.
The annual increases, which are guaranteed by the triple lock, mean there will be other increases as well.
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For those in the last of the two aforementioned camps, born on or after April 6, 2016, the state pension will increase each week as long as they postpone at least nine weeks.
The state pension then increases by one percent for every nine weeks of deferral, thus significantly less generous but still standing at a respectable increase of 5.8 percent each year.
This means that if they receive the new state full pension of £ 179.60 per week, a one-year deferral will entitle people to an additional £ 10.42 per week.
Whether people qualify for the state full pension or not depends on their National Insurance (NI) record.
People generally need at least 10 years of qualification on their NI record to receive a state pension and 35 years of qualification to receive the state full pension.
If people have qualifying years between 10 and 35, they will receive part of the state’s full pension.
People wishing to move abroad should be wary, however, as they will not receive the state pension increases typically accrued by delaying if they reside in certain countries.
Once someone has postponed their pension as much as they want, they can apply for their increased state pension.
If they have deferred their state pension for a year or less, they can apply online or by mail.
If they have deferred for more than a year, they will have to call the pensions department to claim their state pension.
As people live longer, they spend more of their lives in retirement.
Delaying state pension payments can be attractive to those who want to work past retirement age and do not want to see a severely reduced drop in income upon retirement.