State pensions: to defer or top-up?

Tuesday 15th September 2015 10:39 EDT

Not many people are aware about state pensions and how much one ought to contribute, as well as who will be entitled to the pension and how much the nth amount will be. There are many people who opt to contribute a minimum of £30 each month from their salary towards their pension, with a positive prospect that it would help them in their frail years, or benefit their family when they expire. On the other hand, there are people who choose not to be part of the pension scheme, most probably those from wealthier backgrounds.

The Government will be introducing the opportunity to “top-up” your state pension. It will be offered to men and women of a qualifying age; men born before before 6th April 1951 and women born before 6th April 1953. For a limited time between 12th October 2015 and 5th April 2017, they will have the chance to swap lump sum savings for an increase in their state pension for life.

If you are eligible to buy the top-up, the most you can spend is £23,900. The top-up option will buy you a small amount of extra state pension for life. However, an alternative option in which you could boost your entitlement is by deferring your state pension for many years. Deferring your state pension means that you will claim a much higher amount when you start to claim it in the future.

One of Britain's top pension experts, Alan Highams stated, “The terms for deferring their pensions, for people reaching state pension age before April 6 2016, are very generous. They were set many years ago when life expectancy was much lower.”

He continued, “People have to live for just over nine years after they start to claim their deferred state pension to break even, compared to taking the pension when first entitled. People already drawing their state pension can suspend it and benefit from the generous increases, too.”  

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