Did you know you don't have to start taking your State Pension as soon as you're eligible to claim it? We look at what it means to defer your State Pension and what to think about if you're considering doing it.
What does deferring your State Pension mean?
Deferring your State Pension means putting off claiming it. Or it can mean stopping your State Pension and taking it again at a later date.
You can currently start taking your State Pension when you’re 66 (rising to 67 by 2028). But not everyone wants to do this when they reach State Pension age.
If you defer your State Pension, you’ll potentially get more money after you do take it.
How do you defer your State Pension?
If you haven't already started claiming it, there's usually nothing you need to do to defer your State Pension. This is because you need to let the government know you want to start receiving it in the first place. So if you reach State Pension age and simply don’t claim it, what you’re actually doing is deferring.
You'll also need to contact the Pension Service or Northern Ireland Pension Centre if you’ve started claiming your State Pension and want to stop it for a while. You can only start, stop and restart your State Pension once. If you do this and you live abroad, you might not get extra State Pension – see MoneyHelper for details.
Keep in mind that the information in this article applies to those who reached (or will reach) State Pension age on or after 6 April 2016. If you reached State Pension age before this date, things will work differently for you.
How much more money can you get?
The amount of extra State Pension you can get depends on how long you defer for.
Let’s say you’re eligible for the new State Pension. Right now, the full amount gives you £203.85 per week – just over £10,600 a year.
You’ll get extra State Pension for every week you hold off claiming, but only if you defer for a minimum of nine weeks.
Then, for every nine weeks you defer, your State Pension goes up by 1% (which is £2).
That means if you defer for a whole year, you’ll get an extra 5.8% in State Pension annually for life. This works out as an extra £11.82 per week – £614 per year.
If the State Pension rises in future (for example, with inflation), you could potentially get more for deferring.
Why do people defer their State Pension?
You can get extra money at a time when you might need it more
You may still be working and have a salary when you reach State Pension age, and/or you might’ve started taking money from a pension plan.
If you’re confident you can fund your lifestyle with other sources of income, you might not feel you need your State Pension right away.
Deferring could allow you to get extra money at a time when you could benefit more from it – for example, once you’ve fully retired.
You might pay a lower rate of tax in future
Some people hold off on claiming their State Pension so they might pay lower rates of income tax when they do take it.
Your State Pension is counted as taxable income. So if you’re still working when you claim it, you’ll be taxed on your salary and your State Pension added together.
But you might drop a tax band when you stop working (remember, tax bands are different in Scotland). For example, you might go from being a higher-rate taxpayer to a basic-rate one. If you know you’re going to move into a lower tax band once you retire, you might choose to defer until then. This means you could pay less tax on your State Pension amount than you otherwise might’ve done.
Some people find that claiming their State Pension while they’re working pushes them into a higher tax band altogether. So, again, you might choose to hold off on claiming until after you’ve retired.
Don’t forget that your own personal circumstances, including where you live in the UK, will have an impact on the tax you pay. Laws and tax rules may change in the future.
But there are important things to consider
You might not get any extra at all
You can’t build up extra State Pension if you defer while you’re getting certain benefits.
So if you were to defer while you were receiving, say, income support, you wouldn’t get any extra State Pension later. You’d just get the amount you would’ve done if you hadn’t deferred it.
You also won’t get any extra State Pension if you have a partner on particular benefits. Visit GOV.UK for a list of benefits this applies to.
You may become ineligible for certain benefits
Getting extra money after deferring your State Pension? Your income might be too high for you to qualify for Pension Credit and other benefits you otherwise could’ve received. Or you might get less money from certain benefits, so do check which ones could be affected at GOV.UK.
Pension Credit is a benefit for people who have reached State Pension age and are on a low income. It tops up your weekly income and can help you get other discounts and benefits, like help with health and housing costs. But if you get extra State Pension, your income might not be low enough for you to be entitled to this. To find out more about Pension Credit and how to claim it, you can read our article.
It could take a while to break even
Let’s say you defer the full new State Pension for an entire year. It’d take around 17 years of extra payments to make up for the time where you weren’t claiming your State Pension.
According to the Office for National Statistics (ONS), a man who is currently 66 has an average life expectancy of 85. A 66-year-old woman has an average life expectancy of 87. And many people may live longer than this. So it is possible for people’s deferred State Pension payments to even out over time.
But it all comes down to circumstances. If you’re in poor health and think it’s unlikely you’ll live long enough to break even, you may decide deferring isn’t quite right for you.
You can check your life expectancy based on your age on the ONS life expectancy calculator.
What could your next steps be?
Overall, you’ll need to think carefully about whether deferring could actually benefit you before you make a decision.
Remember, there are other ways to potentially get more State Pension. If you’re not eligible for the full amount of the new State Pension, you could explore whether making voluntary National Insurance contributions could boost what you get.
If you’re looking for more information about the State Pension in general, read our State Pension changes article.
The information here is based on our understanding in July 2023 and shouldn’t be taken as financial advice.
Standard Life accepts no responsibility for information in external websites. These are provided for general information.
Your own personal circumstances, including where you live in the UK, will have an impact on the tax you pay. Laws and tax rules may change in the future.