State pension could be increased by decision to delay – but tax may be due later – Express

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Not everyone will want to claim their state pension at the age of 66 for a myriad of reasons. Regardless of the motivation behind the decision, deferring the state pension could be beneficial.
This is because the process could increase the payments a person gets when they decide to claim it.
However, older people who delay collecting their state pension by just two years could face the prospect of being subject to income tax.
This is according to new analysis, which has pinpointed two issues as contributing factors.
The Government’s recent decision to freeze tax thresholds, and the bumper triple lock boost could mean some Britons trigger an income tax bill.
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Chancellor Jeremy Hunt promised a 10.1 percent rise will be enacted in April 2023.
Under current rules, the new state pension increases by an extra 5.8 percent.
This will mean someone entitled to the full state pension next spring, but deferring a payment to April 2025, may expect to receive approximately £12,996 per year.
But according to Canada Life, this would exceed the frozen Personal Allowance of £12,570 – meaning income tax could be due.
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If a person wants to defer their state pension, they do not have to do anything.
This is because their pension will be automatically deferred until the individual decides to claim it.
The amount of extra state pension a person gets depends on when a person reaches state pension age.
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For those who reach state pension age on or after April 6, 2016, there are specific rules.
The state pension will increase every week an individual defers, as long as this is done for at least nine weeks.
The state pension increases by equivalent of one percent for every nine weeks – working out as just under 5.8 percent for every 52 weeks.
The extra amount is paid out with a person’s regular state pension payment.
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Those who reached state pension age before April 6, 2016 can either take their extra sum as either higher weekly payments, or a one-off lump sum.
In this case, the state pension will increase every week they defer, as long as they defer for at least five weeks.
For the basic state pension, this increases by the equivalent of one percent for every five weeks they defer.
As a consequence, this works out as 10.4 percent for every 52 weeks.
When it comes to a lump sum payment, this is only possible if a person on the basic state pension defers for at least 12 months in a row.
This will include interest of two percent above the Bank of England base rate – which was increased to 3.5 percent yesterday.
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