Pension deferral: When should you think about deferring your retirement? Expert advice is available.
More than a quarter of those over the age of 65 are unaware of the benefits of deferring their pension.
Although it may not be the best option for everyone, people should think about all of their options because deferring could result in significant benefits for some.
According to AJ Bell research, persons who live over the age of 90 can get nearly £7,000 extra throughout the course of their retirement by postponing their state pension for just a year.
According to Ian Neale, Co-Founder of Aries Insight, the selection must take into account a number of elements.
“People frequently underestimate their own longevity and believe they will die sooner than they actually do.”
According to him, today’s 65-year-olds are likely to live into their late 80s, implying that they will need to provide for themselves for another two decades.
Many people, he claims, do not have sufficient pension assets to afford an acceptable income in retirement.
For instance, he claims that a pension amount of roughly £100,000 is typical. However, if this is converted into an annuity, the individual will only receive around £4,000 per year if they are lucky.
This isn’t going to give anyone with a comfortable lifestyle, therefore in these situations, it can be worth looking into other ways to supplement retirement income.
Going from a higher-than-average annual income to a lower-than-average retirement income is likely to be unsettling, especially for those who have been accustomed to earning upwards of £30,000.
This, combined with people’s aversion to a big loss in income in retirement, suggests it would be worth deferring the state pension in order to accumulate more income in the future, he concluded.
The drop is to be expected, according to Stephen Lowe, group communications director at retirement specialist Just Group, given the growing State Pension age and adjustments made with the New State Pension in April 2016 that decreased the benefits for postponing.
“Deferring State Pension is still an option and should be examined with other retirement options,” he stated.
“In certain cases, foregoing some income in the short term in exchange for a bigger income later in life that is guaranteed to keep up with inflation makes sense.
According to the Office for National Statistics, a man’s average life expectancy from the age of 66 is 19 years and a woman’s is 21 years. “Brinkwire News in Condensed Form.”