Firstly, am I allowed to defer claiming my UK state pension ?
In the United Kingdom at present the state pension is currently 66 (as May 2024) for both men and women since being equalised.
However though, this due to gradually rise to age 67 for all individuals between 2026 and 2028. It is then scheduled to rise again to age 68 between the dates of 2044 to 2046. Although these dates and timeframe is set to be reviewed but has been on hold by the current government until after this years general election.
How do I qualify for any state pension ?
An individual has to have a minimum of 10 years NI contributions to receive any entitlement. For the full amount of £ 221.20 per week it is normally 35 years full contribution service record. The state pension is normally paid out every 4 weeks. You can no longer claim the increase as a one-off lump sum, it will simply be paid as a regular income. As the rules were changed back in April 2016.
It is currently not taxable as the amount is presently below the tax free annual personal allowance of £ 12,570 (as per 2024/2025 tax year). But it would be added to any other earnings within the tax year and they will be taxed accordingly.
So what counts as a qualifying year ?
It is simply where a person was working and has made appropriate national insurance payments to obtain credit. If somebody isn’t working they may attain credits through the payment of certain means tested benefits. Even if they are considered unemployed, a carer for someone or a parent.
Remember: You will no longer pay National Insurance contributions or payments once you reach state pension age.
What if I have missing years ?
If you have missing years you can make up the shortfall. It currently costs £ 825 to make up each missing year. It may be that you have part missing years so it will be a reduced amount.
However though most people may work from age 18 to 66, so should have more than enough qualifying years to receive the maximum amount on offer at SPA.
If you need to get a record of your state pension entitlement, go through the following links on gov.uk for contact the Future Pension Service on 0800 731 017
If you cannot access online, you can make an application by post, on the following link.
So what happens if I defer claiming ?
If you don’t claim it will be increase by 1% for every 9 weeks that you defer. Or the equavalient of 5.8% per annum. As per new rules introduced in April 2016.
So a simple example if you defer it for the full 12 months, it would be increased by £ 667 for that 1st year, resulting in an annual amount being £ 12,169. At the current rates, obviously if the rate is increased the amount of deferral would also increase. They reckon it would take around 17 years to reach the break even point based on the current figures.
If you reached state pension age before April 2016, you can defer for every 5 weeks and the increased amount is different it works out at 10.4% for each year that you defer. However the weekly amount is a lot lower, it is currently £ 169.50 per week, so a lot lower than current rate of. £ 221.20.
For those that did defer what we call the old state pension (pre 2016) you can take the increase as a lump sum. Although it will be taxed once you receive that payment.
Whether or not you claim or defer your state pension is down to your personal circumstances.
So why would somebody defer claiming ?
- An individual may carry on working, so they don’t need any additional income, hence the reason for delaying.
- By claiming weekly state pension it may push them into a higher tax bracket. So somebody may go from the basic rate (20%) into the higher rate (40%) tax bandings.
- They may not want any more additional income, they may choose to delay so payment once due is at a higher amount.
- They may be in good health and think they will live for many more years.
So why may somebody not decide to defer ?
- They may think that after working for many years they are entitled to it at a specific age.e
- People could think if they don’t claim it, they may lose it in future.
- Someone may have no other pension provision, so they need some more income to pay the bills and fund current lifestyle.
- They may be struggling financially, so need some additional income.
- They may think that the payback period is too long to justify.
- An individual may be suffering from ill-health and a poor lifestyle.
Remember: The state pension can only be paid if you claim it, a lot of people aren’t aware that you have to claim it at your specific date of entitlement. Which is currently linked to your date of birth. The Department for Work and Pensions (DWP) will normally write to you 4 months before your state pension age so you can claim it.
Unfortunately, the UK government set the date of entitlement and also the amount that is paid.
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