Pensioners who choose to defer claiming their state pension when they reach state pension age may get extra state pension when they do eventually claim it.

Currently, state pensions will increase by 1% for every five weeks that a claim is put off. This is the same as 10.4% for every full year putting off a claim.

As a result state pensions will increase by 1% for every nine weeks of deferral or around a 5.8% increase for each full year.

Pensions minister Steve Webb said: ‘It is my intention to bring forward draft regulations later this year, under the powers in the Pension Act 2014, which will set out the proposed rate. These regulations will be subject to the affirmative procedure.’

Kay Ingram, divisional director of individual savings and investments at financial planners LEBC, says this move is ‘quite a big step change and may cause many who are deferring their state pensions to reconsider whether that is the right thing for them to continue to do’.

‘If, as widely predicted, interest rates start to increase later this year, the deferral rate will increasingly look like less good value.’

There are tax implications which need to be considered, warned Ingram. ‘Whether an individual should defer or not depends entirely on personal circumstances, including their health, the extent to which they have other income sources and the rate of income tax which they would pay if they received it now’.’

The ministerial statement is available at http://www.parliament.uk/documents/commons-vote-office/July-2014/22%20July%202014/29-DWP-PensionIncrements.pdf