The government has nearly halved the incremental increase to the state pension offered to people that opt to defer their state pension.

The Pensions Minister Steve Webb said that individuals who chose to postpone their drawing of the state pension beyond the state pension age would get a 5.8% a year increase for each year deferred, down from 10.4% currently.

In addition the option to take a lump sum for deferring your state pension is to be removed altogether. These changes would affect anyone retiring from 06/04/2016.

As this would mean that if you defer for a year you would have to live nearly twice as long under the new rules to benefit, deferring your state pension is a lot less attractive. You would have to live for around 19 years to benefit from this decision to defer a year.

An alternative for those still working may be to draw the state pension at your state pension age and re-cycle the state pension into another pension scheme. This would be tax and income neutral but offers the following benefits:

Build a bigger pension fund for when you do retire.

You could access tax free cash when you draw benefits (no tax free cash from the state pension).

You are in control of a death benefit from the re-cycled pension.

If you would like to discuss this or any other issues around your retirement please contact us by email on enquiries@pandbifa.co.uk or phone us on 0151 546 1969.