More than 14,000 people opted to stop receiving their state pension in the 2018/19 tax year, most likely in a bid to manage their tax liability, Canada Life said.
A freedom of Information request by Canada Life showed 14,300 people chose to stop receiving their state pension, while a further 1,500 people requested to re-start their state pension in 2018/19.
People receiving the state pension have the option to suspend and re-start payments only once.
However, the rules differ for people who reached state pension age before or after 6 April 2016. Those who reached state pension age before April 2016 can get an enhanced state pension when they re-start, with the weekly payment enhanced by 10.4% for each year it is suspended. Alternatively, they can take a lump sum equivalent to the sum of the payments suspended plus interest at least 2% above the Bank of England base rate.
But for those who reached state pension age after 6 April 2016, the terms are less generous with the enhancement rate set at 5.8% for each year it is suspended and no option to take a lump sum.
According to Canada Life, the average increase in weekly payment paid to those who chose to re-start their state pension in 2018/19 was £44.50.
Canada Life’s technical director Andrew Tully said there could be a number of reasons pensioners chose to stop their payments, most likely the fact they didn’t need the income and were looking to manage their tax liability either because they have returned to or continue to work or because of an inheritance.
Tully commented: “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.
“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 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.”
