Deferring your state pension does not have the same advantages it used to.
Stephen Baxter, Joint Managing Director at Robertson Baxter, believes there is little-to-no benefit for those approaching retirement age to defer their pension pay-out as they will no longer benefit as to the levels they would pre-April 2016.
Under the previous incentive, people nearing retirement age would choose to defer their pension thanks to the Government offering an extra 10.4% for every year the pension was deferred. “This enticement has now been slashed,” said Stephen, whose firm offers financial planning for high net worth individuals, charities and trusts in the region
“Those who are of state pension age after April 2016 will now only receive an extra 1% for every 9 weeks they defer being paid, equating to just under 5.8% a year, nearly half of the previous offer.
“This means that you will have to live a further 19 years to make delaying your pension worthwhile,” he added.
“Men born after 1951 and women born after 1953, who receive the new full state pension of Â£159.55 per week or Â£8296.60, will only be receiving an additional Â£479 plus inflation as measured by CPI, if they delay by just one year.
“Another option for individuals would be to draw your pension but pay it into a personal pension as tax relief is available until age 75. A personal pension is flexible with payments usually being allowed to be in the form of a lump sum.”