Help! State pension deferral boost means I miss out on pension credit

I was born in March 1948. I continued to work until I was 67. I had deferred my retirement – so I get £1108.36 every four weeks.

I own and have paid for my small semi-detached bungalow. As a single person I get a 25 percent discount on the council tax.

I did not know that due to deferral, my income exceeds the basic pension, I have to pay tax on it and am not eligible for a pension discount and all associated benefits. This is how I pay for the dentist and so on.

I would like you to let other people see my mistake to go ahead and procrastinate. I would also like your advice on anything else I can claim.

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Steve Webb replies: Unfortunately, your experiences remind people that before they consider deferring their state pension, they should ensure that it does not adversely affect the benefits they would otherwise receive when they retire.

You reached retirement age at the age of 60 in 2008, but opted to postpone your state pension.

Under the old statutory pension system (for those who reached retirement age before April 6, 2016), you could benefit from deferral in two ways: either by taking a lump sum to cover the pension you did not draw, or by a permanently increased pension get pension.

You opted for the higher pension and received a surcharge of 10.4 percent for each deferral year.

If you are deferred for exactly seven years, you will receive an extra 72.8 percent on your pension.

The problem with this, as you discovered, is that you went from a pension below the pension credit level to a higher level.

At current rates, a single person can qualify for a pension credit if they have a weekly income from pensions etc. of less than £182.60.

Your current pension is about £277 a week so you are missing out, but without the deferral bonus it would have been about £161 and you would then have been entitled.

As you understand, there is a list of things you would get if you had a retirement credit, as well as the weekly payment.

This includes automatic rent assistance, full council tax support, cold-weather payments if it freezes for seven days, a “warm house rebate” on your utility bill, additional government assistance on living expenses, and so on.

Even for those who would not receive a pension credit, an increased AOW level due to deferral may reduce entitlement to other means-tested benefits, such as rent allowance (for tenants) and council tax assistance.

As a rule of thumb, anyone considering deferring their state pension should think twice if they are entitled to an *only* means-tested benefit upon retirement.

As for the things you can claim now, I’m afraid your income – which is now about 50 percent above the pension credit level – means you probably don’t qualify for anything purely because of low income.

Instead, your annual state pension (based on 13 four-weekly payments of £1108) is around £14,400 and this means you’ll even have to pay income tax on the portion of your pension above the tax-free personal allowance of £12,570.

I guess it’s a gamble, but an option would be to complain if you feel you weren’t properly informed about the consequences of this at the time of the delay.

However, I have looked at the gov.uk website page on state pension deferral and it does state explicitly: ‘Postponing can also affect how much you can receive in benefits.’

Unfortunately, if that information was available at the time, there may not be much that can be done now.

I am grateful to you for taking the trouble to share your experience, which is indeed a warning to others to take a good look before delaying their state pension.

The deferral reward is now lower under the new old-age pension system – an extra 5.8 per cent per annum, and not a fixed amount option unless you return your claim for 12 months and lose the allowance for that period.

However, the same thing can still happen to others, especially if they put it off for several years.