Those that receive the full old Basic State Pension will also see their weekly payments increase by £3.65 from £122.30 to £125.95.
The 3% increase means that annually these pensioners get a total of £6,549.40 in 2018/19, up from £6,359.60 in 2017/18 – which means they will be £189.80 better off over the course of the year.
Of course, this is in pure cash terms: the eroding effects of inflation could mean you will be no richer – or even poorer – in real terms, depending on your spending habits.
Tricks to boost your State Pension
There’s no way to access your State Pension benefit before you hit your State Pension age but you can delay when you receive it.
This might sound like a weird thing to want to do but it could result in you getting higher weekly payments or even a lump sum boost of up to 10.4% for each year you put it off.
How deferring you’re State Pension works
Those nearing State Pension age have the option of delaying when they receive it. Your pension will be automatically deferred until you claim it.
You can also choose to defer your State Pension even if you’ve already started claiming it. This loophole is not often mentioned but it’s entirely possible to ‘un retire’ and boost your future income.
How much can you get?
The amount of extra State Pension you can get will depend on when you reach State Pension age and whether you are entitled to the old style basic State Pension or the new State Pension.
If you reached State Pension age before April 6, 2016
If you reached State Pension age before April 6, 2016 you’re eligible for the basic State Pension and you can get 1% extra for every five weeks that you delay claiming it. This amounts to 10.4% for every full year you put it off.
So for someone getting the basic State Pension of £119.30 a week or £6,203.60 a year, delaying for 12 months will get you an extra £645 a year.
You can choose to take this extra income through higher weekly payments. Alternatively, you can go for a one-off lump sum option.
To get a one-off lump sum you must defer for at least 12 months in a row. The amount you get is worked out as if you had put the deferred pension into a savings account where it earned 2% above the base rate (which is currently 0.50%).
So for someone earning the basic State Pension of £119.30 a week, over a year you'd earn £6,203.60. Deferring for a year will allow you to take a lump sum of £6,343.18.
If you reached State Pension age on or after April 6, 2016.
If you reach State Pension age on or after April 6, 2016 you can get 1% extra for every nine weeks you defer the new State Pension. This equates to a 5.8% boost if you delay for a full year.
So for someone getting the full new State Pension of £155.65 a week or £8,093.80 a year deferring for a year will earn an extra £468, which you take through higher weekly payments.
Those who reach the State Pension age on or after April 6, 2016 don’t have the option of a one-off lump sum payment.
Should you defer your State Pension?
Deferring your State pension means giving up access to your money for a number of weeks or even years.
So this only really makes sense if you have alternative sources of retirement income like a personal or workplace pension that can support you during those periods.
You should also consider the time it will take for deferring to pay off.
Those who retired on or after April 6, 2016 will have to live for around 17 years to reap the benefit from delaying their claim for one year at the rate of 5.8%.
For those who retired before April 6, 2016 they only have to live around 10 years to see the benefit of deferring for one year at the rate of 10.4%.
Are Class 3A voluntary contributions a better option?
You can choose to top up your State Pension by between £1 and £25 a week equivalent to an annual boost of £52 or £1,300 a year for the rest of your life.
However, you will need stump up a lump sum in order to purchase this boost. The amount you pay depends on how much extra income you want and how old you are when you make the contribution.
You should work out how much it would cost you for the amount of extra income you want to get by deferring or using the top up system to see which one works out as better value for you.
Of course if you don’t have a lump of savings to hand over you won’t be able to top up your State Pension using Class 3A voluntary contributions and deferring your State Pension will be the best way to boost your income.