People due to retire this year could boost annual State Pension payments by up to £664

A survey of 1,050 retired and semi-retired people by later-life specialist Just Group has found that a quarter (25%) of those aged 55-64 are unaware of the option to defer their State Pension. The official age of retirement is 66 for men and women, but this is set to rise to 67 between 2026 and 2028.

Those who are eligible for the New State Pension (eligible post-April 2016) can benefit from a one per cent increase in their weekly State Pension for every nine weeks they delay claiming the payment, equivalent to nearly 5.8 per cent extra income for every full year deferred.

Just group explained that after the annual Triple Lock uprating boosted the full New State Pension to £221.20 each week for the 2024/25 financial year, people due to retire, who choose to defer claiming their State Pension, will benefit from an extra £12.78 every week - equivalent to a boost of £664.58 over the next 12 months.

Those who reached retirement age before April 6, 2016, but chose to defer claiming the Basic State Pension, are treated more generously, according to Just Group.

These retirees receive an extra one per cent State Pension income for every five weeks deferred, equal to an annual rise of 10.4 per cent or £916.66, which can be taken either as extra income or a lump sum.

The Just Group research indicated that women (26%) were significantly more likely than men (19%) not to know about the possibility of deferring the State Pension, while 26 per cent of those aged 75 and over also did not know deferral was an option.

Commenting on the findings, Stephen Lowe, group communications director at Just Group, said: “Deferring can be a 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.”

However, he added: “While deferring might not be the right option for everyone, it should still be something everyone knows about given that the State Pension is widely considered a ‘bread and butter’ source of income in retirement, with 3.4 million retired households relying on it for more than half of their yearly income.

“Deferring has become less attractive in recent years because the terms have become less generous for those who reached State Pension age on or after 6 April 2016 and there is no option to take the deferred income as a lump sum. However, even for those who reached State Pension age after that date, in some circumstances it can still make sense to forgo some income in the short-term for a higher income in later life that is currently guaranteed to keep up with inflation.”

The retirement specialist said that the State Pension provides an important bedrock of income for many pensioners so it’s crucial people have a full understanding of all the options that are available to them.

New State Pension payment rates 2024/25

  • Full payment rate: £221.20

  • Every four-week pay period: £884.80

Basic State Pension payment rates 2024/25

  • Category A or B Basic State Pension (full rate): £169.50

  • Every four-week pay period: £678.00

  • Category B (lower) Basic State Pension - spouse or civil partner's insurance: £101.55

  • Category C or D - non-contributory: £101.55

State Pension and Personal Tax Allowance

The Personal Tax Allowance threshold will remain frozen at £12,570 during the 2024/25 financial year, which means older people with an income of more than £242 per week may have to pay income tax.

Over the 2024/25 financial year, the full New State Pension will be worth £11,502, leaving just £1,068 before the personal tax threshold is exceeded, so anyone with additional income of £89 or more per week - on top of State Pension - may receive a tax bill the following year.

Similarly, someone on the full rate of the Old or Basic State Pension will see annual payments go up £8,814. This leaves just £3,756 before the personal tax threshold is exceeded, equivalent to additional income totalling £313 per month.

In such cases, HM Revenue and Customs (HMRC) could operate a system known as ‘simple assessment’.

Under ‘simple assessment’, the DWP would notify HMRC at the end of a tax year how much State Pension people have received. If this takes someone over the income tax threshold, there would then be a tax bill to be paid.

The income tax threshold has been frozen at £12,570 since 2021/22.

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