DON’T CLAIM THAT PENSION!
Normally this column advises people to claim things they are entitled to. Today I am doing just the opposite.
It is addressed to all those men and women who are just reaching the age
when they can claim their state pension. That is men approaching 65 and women
born 6 October 1951 or later who are around 61 years 6 months.
Here’s the message about your state pension – DON’T CLAIM IT!
Of course if you have stopped work and you need the money from your
pension then you should claim it. But anyone who does not really need the extra
hundred odd pounds a week should leave it where it is. The reason is that the
Government offers a brilliant deal for anyone who defers claiming their pension.
For every five weeks it is deferred the pension is boosted by 1%. So if you can
manage without it for a year you get it boosted by more than 10%. And if you can
survive for five years it will be 52% higher when you do claim it. So the basic
state pension which is currently £110.15 a week will be boosted to £121.61 in
one year and £167.43 in five years. Those figures are in today’s terms and will
be raised each year with inflation. And this higher pension will then be
inflation-proofed for life. It is the best pension deal there is.
As an alternative to a higher pension you can claim all the pension you
have missed, in a lump sum at the end of the deferral period. You will also get
interest paid at a rate which is currently 2.5% a year. That is a good deal too
but may not be as good as claiming the enhanced pension depending on your
circumstances and how long you expect to live.
Of course the downside to deferring is that if you do not live to claim
your pension you will never benefit from the rise. The life expectancy at
pension age is 19 years for men and 24 years for women. But if your health is
poor and you do not expect a long life deferring is not so worthwhile.
The Government is cutting these benefits for anyone who reaches pension
age from April 2016. They will get half the boost – 1% for every ten weeks’
deferral and the lump-sum scheme is being ended.
Deferring your pension is the easiest thing possible. Just do nothing and
it is deferred. If you want to know how much your pension would be if you did
claim it call the freefone pension line 0800 731 7898. You will need your
National Insurance number. But don’t claim the pension unless you really need
it.
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