State pensioners have the chance to boost their pension pot by an extra £916 due to a lesser-known rule, although it does necessitate deferring your pension for an additional year. Currently, individuals can claim the state pension at age 66, but this will rise to 67 in 2028 and eventually to 68 by 2048.
This suggests that you’ll need to work longer or rely on a private or workplace pension if you want to retire earlier. However, there is a strategy known as deferral that could add a £916 top-up to your pension pot.
If you choose to defer your state pension by a year, the total amount you receive when you start collecting it will be higher. At present, for every nine weeks you delay taking your state pension, the payout increases by 1 per cent, according to the Express.
This amounts to a 5.8 per cent increase per year, or £666. These figures apply to those on the New State Pension, which is currently £221.50 per week but will rise annually in line with the Triple Lock.
This means those who reach state pension age after April 6, 2016, will be eligible for the deferral boost, i.e., those born after 1949, reports Devon Live.
Those on the old state pension – born before 1949 – could see an extra 10.4 per cent added to their £169.50 state pension per week, resulting in a total of £916 extra per year.
The government has issued clear instructions for those approaching retirement, noting the need for action: “You do not get your State Pension automatically – you have to claim it. You should get a letter no later than 2 months before you reach State Pension age, telling you what to do.”
They further advise: “You can either claim your State Pension or delay (defer) claiming it.”
For those considering deferral, the guidance is straightforward: “If you want to defer, you do not have to do anything. Your pension will automatically be deferred until you claim it.”
Martin Lewis from MoneySavingExpert.com points out a particular benefit of waiting: “If you’re 65 and still have an income (perhaps because you’re still working), yet are likely to drop a tax bracket later (when you actually retire, for example) – then this is the real boon of deferring your state pension.”