State Pension: Expert outlines criteria to qualify
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Swathes of Britons will be looking forward to their 66th birthday, when they become eligible for a state pension payment. It is at this point many decide they will leave the workforce, due to the financial safety net the state pension is intended to provide.
However, making a presumption about receipt of the state pension could be costly.
The important thing to note is the state pension is not issued automatically to eligible Britons.
People will have to claim it, and if they do not realise this, they could miss out as a result.
The Department for Work and Pensions (DWP) has previously cited this as the biggest reason people fail to get their state pension when turning 66.
Approximately two months before a person reaches this milestone birthday, they should receive a letter from the Pension Service.
The correspondence should clearly lay out what will happen next, and the actions individuals will need to take.
An invitation code should be provided in efforts to help Britons activate a state pension claim – and this can be done online, or by phoning the Pension Service to ask for a claim form.
Those who do not take action will not receive their state pension immediately.
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However, not claiming the state pension straight away could also have its benefits.
A state pension is automatically deferred – or delayed – if a person does not claim it.
The Government website explains: “Deferring your state pension could increase the payments you get when you decide to claim it.”
Any extra payments one gets from deferring, however, could be taxed.
For the new state pension, as long as a person defers for at least nine weeks, they will see their sum increase each week they defer.
It will rise by the equivalent of one percent for every nine weeks – or just under 5.8 percent for every 52 weeks.
The extra amount is paid with a regular state pension payment when a person decides to eventually claim.
For the old, basic state pension, increases occur as long as deferment happens for at least five weeks.
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An increase of one percent every five weeks works out as 10.4 percent for every 52 weeks.
This extra sum can be paid out with a typical state pension payment.
Alternatively, people on the basic state pension could also take their deferment sum as a lump sum.
The Government website adds: “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 two percent above the Bank of England base rate.”
However, people are taxed at their current rate on their lump sum payment.
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