Pensions minister Steve Webb has confirmed the amount of extra state pension people receive when they defer retirement will be cut by almost half.
Currently, the Government incentivises 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.
This morning, in a written ministerial statement, Webb said the increase will be cut to 5.8 per cent a year from 6 April 2016.
It says: “Following careful consideration of the information provided, the proposed new rate wil be one ninth of 1 per cent for each week the state pension is not claimed. This means a 1 per cent increase for every nine weeks of deferral or around a 5.8 per cent increase for each full year.”
Legislation for the change will be published later this year.
Setting out the plan last July, Webb said there was little evidence the incentive encourages people to work longer.
He said he expects the move to save the Government £200m a year in 2020 and £300m a year in 2030.