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The UK state pension is known to pay only a bald sum to live on after retirement.
The full rate of £9,630 a year – or £185.15 a week – barely covers everyday necessities these days, let alone a comfortable standard of living.
But did you know that some savvy retirees receive more than THREE TIMES as much after they legitimately increase their retirement benefits?
In the money: some savvy retirees receive more than THREE TIMES as much as this after legitimately increasing their retirement benefits?
Money Mail can reveal that ten lucky retirees received an astonishing annual payout of £30,100 in the 2021/22 tax year – or more than £580 per week.
The official numbers are in the response to a freedom of information request filed by Money Mail.
This year (the 2022/23 tax year ending in April) those ten lucky retirees have received at least £598 a week, putting them on track for more than £31,096 a year.
The amount they receive increases because their benefit increases every year under the AOW triple-lock guarantee – just like everyone else.
The triple lock increases the state pension with the highest inflation (as measured in September), income growth or 2.5 percent.
Inflation last September was 10.1 percent.
So from April, the ten pensioners will each be eligible for a minimum increase of £3,140 on their annual payment. That brings their state pension income to £34,236 – or £658 a week.
Conversely, pensioners receiving the ‘full’ state flat-rate pension (introduced in April 2016) receive an increase of £972 per annum, taking their annual income to a maximum of £10,600.
So how on earth can these ten retirees bring in so much from the state?
Worth the wait: someone on a basic pension plus Serps of £300 a week could increase their weekly payments to £580 by delaying their start date by nine years to age 74
Benefits of the old AOW
In 2016, the government rolled out a ‘flat rate’ state pension scheme whereby anyone with 35 years of National Insurance contributions receives the full new payout of £185.15 per week.
Anyone who reaches retirement age after 6 April 2016 will receive this payment, anyone who reaches retirement age before that date will receive the ‘basic’ AOW (plus any income-related supplements, see below).
The basic pension, also known as the ‘old’ state pension, pays a maximum of £141.85 per week, or £7,376 per year.
But complicated legacy rules mean that very few people receive exactly those amounts.
Nearly 10 million people, equal to three out of four pensioners, still receive the old state pension, which will be phased out completely in due course.
Four million – or one in three – received more than the ‘flat rate’ £179.60 per week in the 2021/22 tax year.
At the other end of the scale, around 27,000 pensioners – many of them women – are paid less than £1 a week because they have not built up enough state pension entitlements during their working life.
Pros: The state pension system traditionally favors higher incomes rather than providing a fixed basic income at retirement for all workers, experts warn
Raises for a supersized pay
Everyone with the old state pension was entitled to extra income. Many were entitled to an income-related supplementary part of the AOW. This is the first boost the lucky ten used to ‘boost’ their income.
Most people receive this extra pension, called ‘Serps’ (income-related pension scheme from the government), on top of their basic payment.
Some gain just a few extra pounds. But others could receive as much as the full basic pension of £141.85 plus a maximum Serps pension of £185.90.
This works out to a total of £327.75 per week, or £17,043 per year.
Between 1961 and 1975 you could also build up a ‘staged old-age benefit’, raising the total by a few pounds.
The second major boost came from postponing the start date of the pension.
This means that in the years after reaching state pension age (currently 66 years), you surrender part of your income. But when you do start receiving it, the amount will be permanently higher.
Your state pension will increase with every week that you postpone, as long as it is at least nine weeks after you reach state pension age.
In the new system, your state pension will increase by 1 percent for every nine weeks that you are deferred. That amounts to 5.8 percent per year.
But under the old rules, the basic pension rose by 10.4 percent for each deferral year.
This meant that someone with a basic pension plus Serps of £300 a week could increase their weekly payout to £580 by delaying their start date by nine years.
Steve Webb, a former pensions minister and architect of the new state pension, says the deferral system is designed as a “fair deal” that pays retirees back for the years of state pension they have given up.
Mr Webb, who is now a partner at consultants LCP, adds: ‘Someone who has worked for a long time and received good wages under the old system, who has postponed taking their pension for a number of years, can get a state pension that will go into can run into the hundreds of euros. a week.’
Those in good health benefit most because they receive the increased pension for longer.
However, low earners and people in poor health generally cannot get a deferment of payment and have not paid large contributions to their state pensions.
Caroline Abrahams, from the Age UK charity, says the disparity in payouts shows there is still a long way to go before state pensions reach adequate levels.
She says: ‘Although a small number of people receive high amounts under the old system, the amounts received are on average lower than for those who are now reaching state pension age.
This is especially true for older women who receive less than £8,000 a year on average, with some receiving much less.”
j.beard@dailymail.co.uk
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