People planning for their retirement and when they will claim their state pension have been warned some DWP rates are not as generous as they used to be.
Some people choose not to claim their state pension when they reach state pension age and instead defer claiming the benefit.
Rowan Harding, financial planner at ethical financial advisers Path Financial, issued a word of caution about the system.
She said: “Since 2016, the rate of increase for deferring the state pension was not as generous as it has been previously.
“It is around 5.8 percent for each year deferred. At present, the current state pension age is 66, but this will increase to 68 over the next few years.”
Under the current rules, your state pension will increase by the equivalent of one percent for each 9 weeks you defer claiming the funds.
This means your pension will increase 5.8 percent for every year, or 52 weeks.
Ms Harding spoke about who it would suit to defer their state pension. She said: “For those who continue to work past that age and don’t wish to pay more in income tax by commencing their state pension income, deferring their state pension could be a good option.
“But for most people, commencing their state pension income is likely to work for them, even if they have additional income tax.
“Also, being in receipt of state pension might provide you with the opportunity to pay any surplus income you have into other retirement saving pots.”
She said that you can choose to defer your state pension for any length of time but this may not suit everyone.
The expert said: “Ultimately that may not be in someone’s best interest, as the state pension income could be used to cover expenditure needs or another purpose and may give you more freedom in retirement.”
Asked what other things people can do to increase their retirement income, Ms Harding said: “They can continue to work for longer and accumulate more in their retirement savings pots.”
She also recommended for people to look at covering any gaps in their National Insurance record to make sure you get the full state pension.
She also encouraged people to “consider part time working or temporary work, consider all your assets such as different income streams, and equity release could be appropriate in certain circumstances”.
For the latest personal finance news, follow us on Twitter at @ExpressMoney_.
