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Pension trap
KEY POINTS
- Pre-6 April 2016 deferred state pensions can be claimed as a lump sum.
- The lump sum is taxed at a flat rate depending on other taxable income.
- If the deferrer dies leaving no spouse or civil partner unclaimed lump sums are lost.
Until 5 April 2016 individuals could defer claiming the state pension and later take the amount of pension that had been deferred as a lump sum as long as the deferral was for at least 12 months. Alternatively they could claim a higher regular state pension.
Since then those reaching state pension age from 6 April 2016 have still been able to defer claiming but they are not eligible for a lump sum. The only option is to claim a higher regular state pension although the increase is considerably...
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