State pension: How to boost your payments beyond the 3.1% April increase – act now

Pensions: Money Box caller talks impact of age differences

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State pension payments will be rising for next year and for claimants of the new state pension, they’ll get £185.15 per week so long as they have at least 35 year of National Insurance contributions under their belt. However, some retirees may be able to increase their income further by deferring their claims.

State pension deferrals

People will need to claim their state pension when they reach their state pension age as the income is not issued automatically. Retirees should get a letter no more than two months before they reach their state pension age telling them what to do.

Those who do not want to claim their state pension or are not ready to stop working can delay or defer claiming it. Should this be done, their state pension payments could increase so long as the deferral lasts for a certain amount of time.

State pensions will increase for every week of deferment, so long as the claimant defers for at least nine weeks. A state pension will increase by the equivalent of one percent for every nine weeks of deferment, which works out at just under 5.8 percent for every 52 weeks.

These deferrals can increase state pension payments beyond even the “full” amount.

The extra amount is paid with the regular state pension payments when they’re eventually claimed. Those who are already in receipt of their state pensions can pause them for deferral and boost them but this can only be done once.

Claiming a state pension

If a person has deferred their state pension for a year or less, they can apply for it online. They can also print off and post the state pension claim form to the Pension Service or apply by phone.

Claims for regular state pensions can also be made up to four months ahead of reaching one’s state pension age. The quickest way to do this is by applying online but claims can also be made by phone or through the post.

After a claim is made, recipients should receive a letter about their payments. Initial payments can take up to five weeks to arrive and beyond this, payments will come through once every four weeks.

The day a pension is paid will depend on the claimants National Insurance number. The last two digits of the number will determine the claimant’s payment day of the week, as the following details:

  • 00 to 19 – Monday
  • 20 to 39 – Tuesday
  • 40 to 59 – Wednesday
  • 60 to 79 – Thursday
  • 80 to 99 – Friday.

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While state pensions are usually issued on a specific schedule, payments can be upended should they fall on bank holidays. Claimants in Scotland will be affected by this in the coming days.

The next bank holiday in Scotland falls on November 30. For claimants who should have their payments on this day, the money will actually come through early tomorrow.

In England, Wales and Northern Ireland the next bank holiday falls on December 27.

This means state pension payments will fall through on December 24. These bank holiday rules also impact a range of DWP benefits, including Universal Credit and PIP.

Inflation to hit retirees

Pensioners will likely need to carefully evaluate their retirement options as inflation problems are set to impact their income well into 2022. In mid-November, inflation rose to 4.2 percent, more than double the Bank of England’s two percent target.

Maike Currie, an investment director at Fidelity International, warned retirees are facing difficult months ahead of them as inflation is expected to rise further.

She said: “For many households life is rapidly getting more expensive with the cost of transport, household services, and hospitality, the biggest contributors to the rise.

“But this is just the beginning, the Bank of England expects prices to keep accelerating until inflation reaches a peak of around five percent next spring, thanks to a toxic combination of supply chain disruption, rising energy prices and too few workers for too many job openings pushing prices higher.

“The big unknown remains: is the spike we’re seeing temporary as demand rebalances post Covid, or are price rises becoming more entrenched and permanent.

“The Bank of England governor said he is ‘very uneasy about the inflation target’. With the labour market escaping the end of the furlough scheme relatively unscathed, the scene is set for a December interest rate rise.

“While the financial impact of a move to 0.25 percent interest rates will be limited, it does signal the start of borrowing getting more expensive, and with the cost of everyday goods remaining high and this will hit consumer confidence. The winter will be a difficult adjustment period and households will need to hold tight, with the hope that 2022 will bring some relief.”

Ms Currie concluded by examining what lies in store for retirees specifically: “Inflation is an acute problem for those living in retirement, where the income they receive is likely to be fixed. Ensuring that income rises at least by the rate of inflation is a challenge so assets that have the potential to do it will be in demand.

“The state pension is particularly valuable because it is one source of guaranteed income that should rise by at least the rate of inflation. However, with inflation surpassing the 10-year high of four percent – and expected to peak at five percent early next year – some 12.4 million people on the state pension, will see their pension pay out rise by just 3.1 percent to £185.15 in April based on September’s inflation data, after the Chancellor temporarily suspended the so-called ‘triple lock’, which was there to keep pension increases in line with wage growth.”

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