The government plans to halve the amount of extra state pension offered to those deferring retirement in an effort to save around £300 million.
The annual deferral rate is a financial incentive given to pensioners for deferring the state pension payments if they work beyond state pension age.
The deferral rate is currently 10%, but pensions minister Steve Webb (pictured) plans it by half to 5%.
The Department for Work and Pensions has estimated that cutting the rate could save between £200 million and £300 million.
It said: ‘We envisage that the rate of deferral will be broadly actuarially fair. At the moment, there is a financial incentive to defer that is equivalent to about 10% on the pension per year of deferral, but we believe that the right figure would be in the order of 5% although a lot depends on changes in longevity and so on.’
Aviva head of policy for corporate benefits John Lawson said: ‘We’ve been expecting some cuts in the annual deferral rate, but if these are confirmed as the figures it would be quite sharp, and more than we were expecting.’