State pensioners on these DWP benefits urged to | U.Okay.Finance News
Pensioners in receipt of sure benefits are being urged not to defer claiming their State Pension as soon as they attain retirement age. The State Pension isn’t paid to you mechanically when you attain State Pension age – you’ve got to inform the Department for Work and Pensions (DWP) that you really want to declare it. You ought to obtain a letter no later than two months earlier than reaching State Pension age, which is at present 66 for women and men, and you’ve got the option to both declare it or defer. Deferring your State Pension could be an enticing option for some as it could increase the funds you get when you determine to declare sooner or later, however it’s not essentially the best option for everybody.If you attain State Pension age on or after April 6, 2016, your State Pension funds will increase by the equal of 1% for each 9 weeks you select to defer, which works out as slightly below 5.8% for each 52 weeks. So when you get the total new State Pension (at present value £230.25 per week), by deferring for 52 weeks you’ll get an additional £13.35 per week – or £694.20 over a 12 months.But whereas deferral for a 12 months can at present provide you with a £694 increase, it’s important to take into consideration the money you’ll miss out on due to this resolution, significantly when you’re in receipt of some benefits.Pension specialists warn that claimants of Pension Credit, Income Support, Housing Benefit and Council Tax Reduction are unlikely to gain any benefit by deferring and will risk shedding their entitlement to these benefits by doing so.Investment management firm Charles Stanley explains: “Very broadly, you’d need to live at least 20 years after taking your State Pension to be better off deferring – for the uplift in the amount to make up for the years of income given up. This is similar to the time an average 66 year old is expected to live. However, in some circumstances the ‘breakeven point’ can occur at a lower age once you take tax into account.“It is important to note that if you or your partner is in receipt of certain benefits such as Pension Credit or Income Support you should not defer the State Pension. There is no advantage in doing so and it could even mean a reduction in payments.”A key motive pensioners could choose to defer is to keep away from paying tax on their pension income. If they’re nonetheless incomes, or drawing down from a personal pension, they may lose money from their State Pension to tax, so deferring for a 12 months can help keep away from that loss.But the 5.8% reward for deferring doesn’t go up the longer you select to wait, so it means deferral as a result of much less good worth as every year passes. It additionally signifies that you’ll miss out on a 12 months of income which, when you get the total new State Pension, is at present value £11,973 yearly, and you might lose your benefits entitlement as nicely.Citizens Advice provides: “You can choose to keep on working, whether paid or on a voluntary basis, while claiming your State Pension. Any money you earn will not affect your State Pension, but it may affect your entitlement to other benefits such as Pension Credit, Housing Benefit and Council Tax Reduction.”
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