Delaying taking the state pension is a tempting idea – but anyone opting for a higher pay out in later years is taking a gamble.
Holding back a few years before taking the state pension will boost the weekly pay out by 5.8% for each year of uncollected cash.
But if someone dies without drawing their money, their spouse, partner or other beneficiary is only entitled to three months of state pension payments.
The decision is between taking the pension now – worth £159.55 a week – or putting off taking the money for a year and receiving £168.80, which is an extra £9.25 a week for life.
Under the new rules, someone could delay for a year, which will mean foregoing £8,296 to gain the top-up. But if they died, whoever inherits would only get £478.65.
Until April 2016, the choice offered improved alternatives of taking the enhanced weekly amount or a lump sum made up of the missed payments plus interest.
Their family or beneficiaries could inherit the lump sum.
These options were dropped when the flat rate state pension was introduced.
Now, if someone dies, the government will pay a lump sum equal to three months state pension payments.
Deferring has become a gamble anyone in poor health should not consider because they might not live long enough to reap the benefits.
Even if the money is not needed, the pensioner should think about taking the cash and gifting the money to family and loved ones as the gifts are un likely to break inheritance tax rules.
Guidance on the Department of Work and Pensions website does not clearly explain the changes in state pension rules.
Expats are subject to the same state pension deferment rules as everyone else, so delaying the payment will enhance the benefit in later years, regardless of where they live in the world.
Anyone claiming the state pension before April 6, 2016 is subject to different deferment rules.
“Deferring your state pension for a year only really pays off around nine or 10 years after you decided to take your pension, increasing to 17 years after April 2016. You’re giving up more than £6,300 in income each year, so it will take some time for that to build back up again,” says consumer champion Which?.
“Take your health into consideration – if you’re fit and healthy, you could end up with much more money as you get older. ”