Maximise Your State Pension Retirement Income

Investors should consider all sources of income in retirement. Make the most of your State Pension by deferring it to boost the value of your payments

Emma Wall 27 May, 2015 | 10:10AM
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Emma Wall: We know that the majority of readers of Morningstar.co.uk are investing for retirement. This is fantastic. Preparation is key when it comes to long-term investing. But it's important that you consider all elements of retirement income and the State Pension is one of these. A lot of people assume that they will automatically get the State Pension. But like any other pension pot, you need to contribute to be able to withdraw.

With the State Pension, you need to make 30 years of National Insurance contributions. This means that if you have taken a break from work, for example, to raise children, you may not be automatically qualified for the State Pension. However, you can make up these years and go back and contribute those National Insurance payments in order to make sure that you get the State Pension.

There is also some benefit in deferring it. If you are retiring before April, 2016, that is you reach State Pension age before then, deferring State Pension can mean that you get as much as 10% more for every year that you defer.

That means, for example, if you retire with an income from your State Pension of £8,000, deferring for just five years could mean that it goes up to £12,000 a year. However, after April 2016 there will be a new type of pension which will not benefit from this increase. There will be some benefit from deferring, but not as much as this.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Emma Wall  is former Senior International Editor for Morningstar