PENSION PAIN
State pension warning over easy mistake that could mean you miss out on £3,900 in benefits
Plus we reveal exactly how to know if you're eligible
A WARNING has been issued over an easy state pension mistake that could mean you miss out on £3,900.
Deferring your pension is often seen as an easy way to boost your savings pot when you do decide to retire.
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That's because for every year you delay, you boost your pension by just under 5.8%.
But for some, it might be a big mistake, because it may then put you over the threshold for Pension Credit - a handy benefit worth up to £3,900 a year which also unlocks the Winter Fuel Payment.
The Sun was inundated with calls from hard-up pensioners during its Winter Fuel SOS phone-in last week who fear they will be unable to heat their homes without the payment this year.
Many had been disappointed to find that because they had put off taking their state pension, they were now over the limit for Pension Credit.
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Now, people who might find themselves in the same position are being urged to not take the decision lightly.
The single-person Pension Credit rate is £218.15, while the full new state pension is £221.20 so if you get the full amount then you already are over the threshold.
The people who would be affected by this are those who get less than the full amount of state pension, due to the number of "qualifying" National Insurance years they have.
However, if your pension is below the full rate then if you take it on time you might get Pension Credit - as well as the WFP and cold weather payments.
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Under current rules, you need 35 qualifying years to get the full amount of state pension.
For example, someone who has 34 qualifying years gets 34/35 of a full pension or £214.88.
If this person takes their pension on time, they are entitled to Pension Credit and everything that comes with it. We have explained all the perks you can get here.
What are the different types of pensions?
But, if they defer for just one year, the extra 5.8% takes them up to £227.34 per week - above the Pension Credit level.
So, this means they then lose out for good on all the extras that come with Pension Credit.
Former pensions minister and partner at LCP told The Sun that "the lesson to learn" is that if your state pension is short of the full amount and you might therefore otherwise qualify for Pension Credit in retirement, "you should think very hard before deferring".
He also pointed out that those who are perhaps working past pension age might think of deferring their pension for tax reasons.
This group could inadvertently end up worse off than if they had simply taken their pension on time.
Mr Webb said: "Not everyone takes their state pension as soon as they reach pension age, and the reward for deferring is an extra 5.8% on your pension for each year you defer.
"But for people whose pension is short of the full amount, there can be a sting in the tail.
"If your normal pension figure is below pension credit then claiming at retirement means you will get a top-up and all the extras which come with pension credit such as keeping your winter fuel payment.
"But if you defer even for one year, you might find your pension is now over the pension credit line and that you have lost all of that additional help - potentially for the rest of your retirement."
Mr Webb believes that the Department for Work and Pensions (DWP) should flag to people who are thinking of deferring that they need to "think very carefully about the potential knock-on effects" of benefit entitlement before they make a decision.
If you're not sure if you will be able to get Pension Credit, you can use our handy tool to check what benefits you're eligible for.
What is Pension Credit and who is eligible?
Pension Credit is a government benefit designed to top up your weekly income if you are a state pensioner with low earnings.
The current state pension age is 66.
There are two parts to the benefit - Guarantee Credit and Savings Credit.
Guarantee Credit tops up your weekly income to £218.15 if you are single or your joint weekly income to £332.95 if you have a partner.
Savings Credit is extra money you get if you have some savings or your income is above the basic full state pension amount - £169.50.
Savings Credit is only available to people who reached state pension age before April 6, 2016.
Usually, you only qualify for Pension Credit if your income is below the £218.15 or £332.95 thresholds.
However, you can sometimes be eligible for Savings Credit or Guarantee Credit depending on your circumstances, even if you're over these limits.
For example, if you are suffering from a severe disability and claiming Attendance Allowance, as well as other benefits, you can get an extra £81.50 a week.
Meanwhile, you can get either £66.29 a week or £76.79 a week for each child you're responsible and caring for.
The rules behind who qualifies for Pension Credit can be complicated, so the best thing to do is just check.
You can do this by calling the Pension Service helpline on 0800 99 1234 from 8am to 5pm Monday to Friday or by using free online calculators.
Those in Northern Ireland have to call the Pension Centre on 0808 100 6165 from 9am to 4pm Monday to Friday.
It might be worth a visit to your local Citizens Advice branch too - its staff should be able to offer you help for free.
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Pension Credit is known as a "gateway" benefit which means it opens up a host of perks, like theWinter Fuel Payment and a free TV licence if you are 75 or over.
It also unlocks discounts on your council tax and the Warm Home Discount, if you are on the Guarantee Credit part of the benefit.
How do I apply for pension credit?
YOU can start your application up to four months before you reach state pension age.
Applications for pension credit can be made on the government website or by ringing the pension credit claim line on 0800 99 1234.
You can get a friend or family member to ring for you, but you'll need to be with them when they do.
You'll need the following information about you and your partner if you have one:
- National Insurance number
- Information about any income, savings and investments you have
- Information about your income, savings and investments on the date you want to backdate your application to (usually three months ago or the date you reached state pension age)
If you claim after you reach pension age, you can backdate your claim for up to three months.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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