Should I Defer My State Pension?

How Does a Deferred State Pension Work?

Deferring your state pension simply means not claiming it until after your retirement age. The rules are slightly different depending on when you retire, but essentially state pension deferral sees you put off your state pension in exchange for higher weekly payments when you do eventually decide to claim it.

While you’re in receipt of certain benefits — including income support, carer’s allowance, incapacity benefit, carer’s allowance and universal credit — you can’t build up extra state pension through deferral. Taking your pension as a higher weekly payment could also reduce the amount you get from certain benefits.

How Much is the Deferred State Pension Worth?

This depends entirely on how long you defer for and when your retirement age is.

If your state pension age was on or before April 5, 2016, then you can take your deferred state pension as either higher weekly payments or a cash lump sum.

For every 5 weeks you defer, your state pension payments increase by 1%, equivalent to 10.4% for every full year you defer. After 12 months of deferral, you’re entitled to ask for a lump sum rather than higher monthly payments.

If there’s an annual increase in the state pension, the amount you receive could be larger.

For those due to retire on or after April 6, 2016, the option for a lump sum after 12 months of deferrals was abolished, so you’ll only get higher weekly payments for deferring your state pension.

You’ll also have to wait 9 weeks, rather than 5, to see any increase. For every 9 weeks you defer, your state pension increases by 1%, equivalent to 5.8% for every full year.

If there’s an annual increase in the state pension, the amount you receive could be larger.

How Do You Defer Your State Pension?

It’s actually very simple to defer your state pension: you just do nothing.

This is because the state pension isn’t paid to you automatically – you have to claim it. If you want to defer your state pension, then you simply don’t claim as soon as you’re entitled to in favour of claiming higher payments later down the line.

When you do eventually come to claim your state pension, this extra sum built up through deferral is paid with the regular payment.

Should I Defer My State Pension?

Whether or not you should defer your state pension is entirely dependent on your circumstances. If you stop working once you reach state pension age and have little to no other retirement income, meaning you’ll rely on the state pension to survive, then deferring your state pension is probably not advisable.

You might, however, plan to keep working past your state retirement age or have other retirement income to live off, perhaps a final salary pension scheme from your employer, an annuity or you’re in income drawdown, for example.

For those who won’t be relying on the state pension age to survive after their retirement age, deferring your state pension could boost the weekly payments when you do opt to take it.