The Department for Work and Pensions (DWP) has announced important changes to the state pension rules that will impact individuals in their sixties.
Starting next year, the state pension age will rise from 66 to 67 for those born between March 6, 1961, and April 5, 1977. This is the first of a series of increases that will continue into the coming decades.
Raising the State Pension Age: What’s Changing?
The state pension age is set to gradually rise over the coming years:
- 2026: The pension age will increase to 67 for those born between March 6, 1961, and April 5, 1977.
- 2044-2046: Another increase will take place, pushing the state pension age from 67 to 68.
These changes mean that instead of reaching the state pension age on a fixed date, individuals will be eligible once they reach the age of 67.
Deferment of State Pension: Is It Worth It?
You do not have to claim your state pension immediately once you’re eligible. The decision to defer your pension could impact your financial situation in the long run.
Martin Lewis, the financial expert, offers some insight into whether deferring the state pension is a good strategy:
- If you defer your state pension, you will receive an increase in your weekly payment. For every 9 weeks you defer, your pension will grow by 1%, which translates to an additional £2.30 per week.
- If you defer for an entire year, your pension increases by 5.8%, which is around an additional £13.35 a week.
Lewis suggests that deferring the pension is beneficial for those with good health or a family history of longevity. However, for those in poor health, deferring may not be a wise choice as the financial gain may not outweigh the immediate need for the pension.
Additionally, for individuals who are earning now but expect to pay lower taxes later in life, deferring the pension could be a financially rewarding decision.
What Determines Your State Pension Amount?
The amount you receive in state pension payments depends on how many qualifying years of National Insurance (NI) contributions you have made. These contributions come from:
- National Insurance contributions made while you are working.
- Credits added if you are unable to work, such as during periods of illness, disability, or unemployment.
The state pension age is set to rise, starting in 2026, impacting those born between 1961 and 1977. This change, along with the potential rise to 68 in the coming decades, emphasizes the need to plan ahead.
For those considering deferring their pension, it’s essential to weigh the potential benefits of a higher payment against personal health and financial needs. Understanding how National Insurance contributions work will also help you plan for a comfortable retirement.
FAQs
Who will be affected by the rise in state pension age?
The state pension age rise to 67 will affect individuals born between March 6, 1961, and April 5, 1977. The pension age will further rise to 68 between 2044 and 2046.
What are the benefits of deferring my state pension?
Deferring your state pension can increase your weekly payment. For every 9 weeks of deferment, you can earn an additional 1% on your pension, which equates to £2.30 extra per week.
Can I delay claiming my state pension?
Yes, you do not have to take your state pension immediately once you reach the eligible age. Deferring it could lead to higher weekly payments in the future, depending on your personal health and tax situation.