Advisers say the Government has “killed off” state pension deferment following the decision to slash the incentive for delaying taking the benefit.
Last week, pensions minister Steve Webb set out plans to halve the extra state pension people receive when they defer retirement in a move which will save the Government £300m a year.
Currently, the Government encourages people to delay taking their state pension by increasing the payment by around 10 per cent a year for each year after state pension age.
Webb says there is little evidence the incentive encourages people to work longer and has tabled an amendment to the Pensions Bill which would reduce the annual deferral increase to around 5 per cent a year from April 2016 onwards.
The Department for Work and Pensions estimates the change will save the Government £200m a year in 2020 and £300m a year in 2030.
Rowley Turton director Scott Gallacher says: “This will kill off state pension deferment because it will take 20 years to get your money back.
“It will also cost the Government money in the short term because more people will take their state pension when they reach state pension age.”
Worldwide Financial Planning IFA Nick McBreen says: “There may be limited circumstances where deferring taking your state pension still makes sense but these will be few and far between.”