Over 14,000 people suspend state pension

State pension payments were suspended by 14,300 individuals during the 2018/19 tax year, Canada Life has revealed.

A freedom of information request submitted to the Department for Work and Pensions by Canada Life showed that, conversely, 1,500 people elected to re-start their state pension in 2018/19.

There was an average increase in weekly payment of £44.50 received by those that recommenced state pension payments.

Canada Life technical director, Andrew Tully, said the “most likely” reason for people to opt out of payments was that “they didn’t need the income and were looking to manage their tax liability, either because they returned to work or continued in paid work, or possibly because they received an inheritance”.

He added: “This sort of flexibility was common in the private pension sector, where people are able to turn income on and off from pensions using the right products, but is not a well understood part of the state pension system.”

People receiving a state pension can only suspend and reactivate it once, after it is in payment.

Those who reached state pension age before 6 April 2016 can get an enhanced state pension when they re-start, with their weekly payments enhanced by 10.4 per cent for each year it is suspended.

They could also opt to take a lump sum equivalent to the sum of the payments suspended plus interest at least 2 per cent above the Bank of England base rate.

People who reached state pension age after 6 April 2016 receive a 5.8 per cent enhancement to weekly payments for each year of suspension, while there is no option to take a lump sum.

“State pensions form the bedrock of most people’s financial plans in retirement. Financial planning experts often talk about the merits of deferring it if the income isn’t required at your state pension age, but the ability to be able to stop/start once you are in receipt of it is not a well-known area of the system,” stated Tully.

    Share Story:

Recent Stories

Time for change: An interview with Nick Burns, CEO, Gallagher’s Employee Benefits Consulting Division, U.K
Francesca Fabrizi interviews Nick Burns, CEO, Gallagher’s Employee Benefits Consulting Division, U.K about the UK pensions industry and asks why the time for change is now

Addressing climate change risk in fixed income portfolios
Francesca Fabrizi meets Lee Clements, director of SRI research at FTSE Russell, to discuss climate change risk in investment portfolios