Pensions - Articles - 14 thousand suspend their State Pension for lump sum

 The rules differ depending upon whether people reached state pension age (SPA) before or after 6 April 2016. Those reaching SPA before April 2016 can get 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 reach SPA from 6 April 2016 the terms are less generous - the enhancement is 5.8% for each year it is suspended, and there is no option to take a lump sum.

 The FOI shows 1,500 people elected to re-start their State Pension in 2018/19, receiving on average £44.50 a week extra payment.

 Andrew Tully, technical director, Canada Life explains: “State Pensions form the bedrock of most people’s financial plans in retirement. Financial planning experts often talk about the merits of deferring it 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.

 “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.”