Over 14,000 Britons asked for state pension payments to be suspended
More than 14,000 people opted to stop receiving their state pension in the 2018/19 tax year, while 1,500 people requested to re-start their state pension payments in the same year, a Freedom of Information (FOI) request submitted by Canada Life has revealed.
The research has been published in a bid to highlight a "little known area" of flexibility within the system.
Under a little known state pension rule, anyone can choose to opt out of receiving their payments, currently payable from age 66. After payouts have begun, under current rules, anyone in receipt of a state pension can only opt to suspend and re-start it on one occasion once it is in payment.
The ability to be able to stop/start once you are in receipt of it is not a well-known area of the system"
Those who reached state pension age (SPA) before April 2016 and chose to stop their payments are able to receive an enhanced state pension when they re-start. The weekly payment is enhanced by 10.4% for each year it is suspended.
Alternatively, a lump sum can be taken equivalent to the sum of the payments suspended plus interest at least 2% above the Bank of England base rate.
for those who reached state pension age from April 6, 2016 the terms are less generous as the enhancement is 5.8% for each year it is suspended, and there is no option to take a lump sum.
Canada Life found the average increase in weekly payment paid to those who chose to re-start their state pension was £44.50.
It is thought a boom in "silver workers" is driving more people to suspend their pensions in a bid to lower their taxable income.
Andrew Tully, technical director at Canada Life, said the ability to stop and start a state pension is ‘not a well-known' area of the system but could be a good option for some people.
"Financial planning experts often talk about the merits of deferring 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.
"DWP data shows over 14,000 people elected to stop receiving their state pension in the 2018/19 tax year. This could be for a number of reasons, most likely is the simple fact 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 is 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.
"A regulated financial adviser will be best placed to not only help explain the myriad of choices available when you are considering accessing your pension savings for the first time, but will also keep you on the right track as you progress on your retirement journey."
Subscribe to International Investment's free, twice-daily, newsletter
