Size of the lump sum gained when deferring state pensions will NOT be as big as initially proposed in the Pensions Bill published two weeks ago, reveals the latest announcement from the Department for Work and Pensions.
The revelation comes as the DWP today said the interest rate used to calculate the lump sum gained from deferring state benefits will be at least 2% above the Bank of England's base rate.
Given the UK base rate currently stands at 4%, people would receive at least 6% extra for every year they delay claiming based on the DWP announcement.
This could see people receiving a lump sum worth up to £30,000 if they defer taking of State pension benefits for at least five years, says the DWP.
However, the Pensions Bill out earlier this month proposed people would gain around 7.5% extra for every year they delay claiming. That would have offered 1.5% more than the government is currently offering, if the BoE's base rate stays the same.
At present, pensioners can only defer receiving their State pension entitlements for a maximum of five years, so the government is removing the limit for anyone who chooses to continue or go back to work.
Anyone who defers for at least one year will receive all the State pension due, plus extra interest before receiving the normal State pension entitlement.
Table shows examples of possible gains from deferring:
Type of Pension
Underlying amount at point of Claim
Years of Deferral
Lump Sum Accrued before tax
Average newly retired woman
Basic pension only (single rate )
Basic pension only (Couple rate)
Average newly retired man
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