Hundreds of state pensioners are receiving annual payments of at least £36,000 from the Department for Work and Pensions (DWP), analysis reveals. This amount is three times the full new state pension, which pays under £12,500 per year.
How Some Pensioners Achieve Higher Payments
According to DWP data, 324 retirees currently receive at least £692.30 per week, equating to £36,000 annually. All of these individuals are on the old state pension, having retired before April 2016 when the new flat-rate system was introduced.
Many who retired before the 2016 changes have boosted their payments through additional earnings-related pensions, commonly known as Serps (State Earnings-Related Pension Scheme).
Deferring State Pension Increases Income
Charles Stanley, a financial services firm, explains that deferring the state pension can significantly enhance payments. For each year deferred, the pension increases by just under 5.8%, which currently adds around £694 per year. However, the breakeven point typically requires living at least 20 years after claiming, similar to the average life expectancy of a 66-year-old.
“If you have sufficient longevity the tax saving combined with the uplift described above can outweigh the short-term income forgone from deferring. However, if you are unfortunate enough to die early in retirement it won’t. That’s why it can be a good option for some and much less desirable for others, for instance those in poor health,” Charles Stanley noted.
Future Limitations on Large Pensions
LCP (Lane Clark & Peacock) told the Telegraph: “These figures are a reminder that outcomes under the old state pension system could vary hugely, with some people receiving very large pensions and others very small ones. In particular, some people with very large entitlements to the additional state pension on top of their basic pension could have pensions of £300 per week or more, significantly higher than the standard rate of the new state pension.”
LCP added that under the new system, it will not be possible to build up such large state pensions, but many pre-2016 retirees will continue to enjoy pensions above the new flat rate.
