Retiring soon? Here's how to get more state pension for free

Do you hit the state retirement age before April 2016? Are relying on the state pension? Do you think that your workplace pension is too small to benefit from the new flexibility offered by the Budget reforms? If the answer to all these questions is 'yes', then think again.

You can use your workplace pension to get a 10% boost every year to your state pension no matter how small a fund you've built up privately.

Under the new rules the government is allowing everyone to access their pension cash in whatever way they like. Now think about how many years you could live off your private pension savings before you'd have to fall back on the state pension.

If the answer is one year or more then you could benefit from a little-known loophole in the state pension rules. If you reach your state retirement age before April 2016 (when the state pension rule shake-up comes into force) then you will receive a boost to your state pension of 10.4% for every year that you defer taking it.

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Combine this with the ability to access your private pension savings more freely using 'drawdown' and you won't have to work for longer and get an increased state pension.

Here's how it works: when you hit state retirement age, you defer your pension. Then you use your workplace pension (for example) to fund as many years as you can using 'drawdown' (the beauty of the new rules is that those with small pots can get their hands on the cash instead of having to buy a poorly paying annuity).

When you've exhausted your workplace pension you can then start claiming your state pension which could have grown by thousands depending on how many years you've deferred it for.

Don't lose out on up to 73% more annuity income

There's no limit to the number of years you can defer for and to put it into perspective the basic state pension for those retiring before April 2016 is £113.10, or £5,881 a year – if it's deferred for two years it rises to £7,104 a year. That's not an insubstantial sum.

This boost is expected to benefit women the most, as they are the ones that have been subject to the most radical moving of the state pension goal posts. Many have seen their state pension age increase while also missing the start date for the new, more generous flat-rate pension.

It doesn't matter how small your savings are – you now have the opportunity to use that cash as you like and squeeze some more money out of the government, what's not to like?!

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