My handy way to boost your state pension by £667 a year – full list of pros and cons

A HANDY move could boost your state pension by as much as £667 every year in your golden years.

Planning for your retirement means looking at your budget and how much cash you’ll have to work with.

But many of those approaching retirement age don’t realise there are other options to help give your pot an increase.

Alice Guy, retirement expert at Interactive Investor (ii), told Sun Money: “Fancy giving your state pension a boost?

“There’s an easy way to do it if you don’t need the money straight away.”

When you reach state pension age you can choose to delay receiving your state pension, which in turn will increase your payments in the future.

Alice explained: “You’ll get an extra 1% for every nine weeks you delay which means delaying your state pension for a year will boost your future payments by 5.8% – up to £667 extra each year.”

That’s because when you hit 66, the current pension age, you have to claim the benefit – it won’t just land in your bank account automatically.

If you resist claiming, it will increase by 1% for every nine weeks you defer.

Over a 52-week period you’d get just under 5.8% extra.

If you’re entitled to the full new state pension amount of £11,501 a year, you could get an extra nearly £13 for every week you defer.

Recently, The Sun spoke to a woman who boosted her retirement income by £1,014 annually by paying voluntary National Insurance Contributions (NICs) and delaying when she took her State Pension.

But, as with most pensions boosting moves, deferring might not be for everyone.

RISKY BUSINESS

Alice warned: “What’s the catch? You could end up with a lot less money if you don’t live to a ripe old age.”

She pointed out that someone who delays receiving their state pension by a year would have to live for around 17 years to start making their money back on the missing year of payments.

“That’s a long time and it’s impossible to know if it’s the right decision at the time,” Alice said.

If you want to delay your state pension you don’t need to do anything, you’d just need to wait for however long you choose.

You can then apply online once you want and the extra payment for deferring will be calculated and paid to you for the rest of your life.

Alice explained further: “If you end up living till 100 years old then delaying the state pension to get more income could be an amazing deal.

“The problem is that it’s impossible to know what will happen with your health in the future and so delaying the state pension feels like a big gamble.

“Most of us would prefer the certainty of the money now.”

Back in the day, she added, it might have been a better choice.

That’s because under the old system, before 2016, you only had to live around 10 years to start making money if you’d delayed your state pension by a year.

“Now, you need to live for around 17 years and that feels like a very long time for most of us,” Alice said.

“In reality, most of us retire before we reach state pension age and need that money to help us in retirement – we simply can’t afford to delay the state pension.”

Other things to bear in mind

You should also bear in mind that by deferring you could affect your entitlement to other benefits such as Pension Credit.

And, only defer if you can actually afford to live without your pension or want to continue working.

Also, it’s important to note that you could be taxed on the deferred payments so make sure you do the maths first.

Of course, it’s important to remember that if you’re not entitled to the full state pension amount you could get less than £667 by deferring.

Under current rules, you need 35 years’ worth of National Insurance (NI) credits to get a full new state pension.

Many people have gaps in their NI record due to time spent out of the workforce – raising children for example.

It’s important to get a state pension forecast which will tell you how much you are on track to get and let you know if you have any gaps in your National Insurance record.

If you do have gaps, it’s a good idea to check with the Department for Work and Pensions to see if you qualified for a benefit during that time which comes with a National Insurance credit – for example Child Benefit and Universal Credit.

And if this is the case, you may be able to backdate a claim.

But if you can’t get a free NI credit, you could pay to fill in the gaps in your record too.

You can usually buy voluntary NICs for the previous six tax years but there’s a current opportunity for those retiring under the new state pension system (post 2016) to fill gaps going back to 2006.

This scheme is set to finish in 2025 so there’s still time to plug those holes.

It’s important to note that before making voluntary contributions, you need to get a pension forecast and speak to the Government’s Future Pension Centre.

The body will be able to tell you whether it’s worth you paying for extra qualifying years, as it may not be beneficial for everyone.

How to apply for the state pension

You’ll have to apply for the state pension – it won’t just be paid automatically once you’ve reached retirement age.

Around two months before you reach retirement age, you should get a letter from the Department for Work and Pensions (DWP) telling you what you’ll qualify for.

You can begin applying for your state pension from three months until you reach retirement age, even if you haven’t received the letter.

You can apply online at the gov.uk website for England, Scotland and Wales – if you haven’t got your invitation letter you’ll need to contact the DWP first to ask for an invitation code.

You will then need:

• the date of your most recent marriage, civil partnership or divorce
• the dates of any time spent living or working abroad
• your bank or building society details
• the invitation code from the letter about getting your state pension

If you live in Northern Ireland then you need to apply on the nidirect.gov.uk website.

If you start your claim in the first 12 months after you reach state pension age, you can ask that the claim be backdated to when your entitlement started.

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