subject: Deferring The State Pension [print this page] As we are now expected to live much longer, especially women, it means that deferring the state pension is now a more attractive proposition.
The facility to take the pension later than the normal retirement age has always been available but relatively few people have taken advantage of the opportunity to draw a higher amount at a later date.
However, now that the value of the pension increases by 10.4% for each year it is deferred, even though this is simple rather than compound, over three years it amounts to almost one third of the basic pension.
At birth, male life expectancy is currently 78 but statistics show that the older we get, the longer we can expect to live.
So if a man has reached his 66th birthday - the age that the pension will shortly be paid - he can now expect to live to 82.6 years of age. For a female this rises even further, with a 66 year old having a life expectancy of 85.2.
Using these statistics, you are able to work out the optimum time to take the state pension.
Of course, there is always a risk of dying earlier and for anyone with a life-shortening condition or a family history of early death, deferring is obviously not a sensible option.
But for someone in good health - and maybe still in work or getting a reasonable private pension - deferral is most certainly worth looking into.
Plans are in hand to increase the state pension to 140, but based on the current standard weekly payment of 102.15, which equates to 5,311.80 a year, deferring for three years costs a male recipient 15,936.40.
However, during those three years, the pension will increase by 31.2% - to 134.02 per week. If that higher pension is then paid to age 82.6 it totals 22,539.03. A potential gain of 6,603.63 if he reaches his full life expectancy.
For a female, the figures are even more attractive. The optimum deferral for women is 5 years. While the pension foregone is 26,559.00, the gain is 39,222.33, a "profit" of 12.663.00 by the time the woman reaches her 85th birthday.
And the longer a person lives past the average age, the more benefit he or she receives from the deferral.
In the past, married women in particular rarely qualified for the full state pension in their own right - less worked all their lives so that the requirement for 44 out of 49 years of full National Insurance payments was hardly achieved. This meant that the woman had to rely on her husband's contributions.
Today, with that qualification reduced to 30 years and more women returning to work after having children or choosing to follow a career, a much larger percentage will receive the full pension on their own contributions which makes deferment extremely attractive.
It is possible to defer the state pension by more than the examples above, but these appear to be the optimum period based on today's life expectancy figures.
As it is believed that up to 25 per cent of people will live beyond the predicted age, a healthy person - male or female - who defers the state pension could end up thousands of pounds better off.
