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The state pension is a form of income which many people will rely on as part of their funding for retirement. However, it’s not something which is paid automatically.
For those approaching state pension age, they have two options.
This is to either claim the payment, or to defer the state pension.
Deferring – of delaying claiming – can be done simply by doing nothing.
As the payment must be claimed, the individual’s state pension would be automatically deferred until they opt to claim it.
While some may prefer to have it paid into their account as soon as they’re eligible, others may opt to wait.
The latter move may be done by some because deferring the state pension could increase the monthly payments once the person does decide to claim it.
It’s important to be aware that those who get certain benefits won’t be able to get extra state pension should they defer while claiming these payments.
What’s more, deferring the payment can also affect how much a person gets in benefits, GOV.UK warns.
“You must tell the Pension Service if you’re on benefits and you want to defer,” it adds.
When a person reaches, or reached, state pension age can affect the amount of extra state pension they could get.
Reaching state pension age on or after April 6, 2016
Those who reached state pension age on or after this date will see their state pension increase each week they defer – provided this is for at least nine weeks.
For every nine weeks deferred, the payment increases by the equivalent of one percent.
It works out at a rise of just under 5.8 percent for every 52 weeks.
Once the state pension is claimed, the extra amount will be paid with the regular state pension payment.
Reaching state pension age before April 6, 2016
The rules differ for those in this group – who get a choice in how the extra amount is paid.
It can either be received as higher weekly payments, or as a one-off lump sum.
Those in this situation will be sent a letter asking them which they would prefer, once they claim the deferred state pension.
After receiving the letter, they will have three months to make up their mind.
Higher weekly payments
Provided the state pension is deferred for at least five weeks, the payment will increase every week it is deferred.
This is equivalent of one percent for every five weeks deferred – equating to 10.4 percent for every 52 weeks.
It is then paid with the regular state pension payment.
Lump sum payment
Should the one-off lump sum be preferred, the individual can get this provided they defer for at least 12 months in a row.
It will include interest of two percent above the Bank of England base rate.
You can get a one-off lump sum payment if you defer claiming your State Pension for at least 12 months in a row. This will include interest of 2% above the Bank of England base rate.
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