Deferring your State Pension: how much can you get and is it worth it?

There’s no way to access your State Pension before you hit your State Pension age, but you can delay when you receive it.

This might sound like a weird thing to do but it could result in you getting higher weekly payments or even a one-off lump sum payment.

This guide takes a look at how deferring your State Pension works, what you could receive, and the pros and cons of doing it.

Those nearing State Pension age have the option of delaying when they receive it.

Your pension will be automatically deferred until you claim it.

You can also choose to defer your State Pension, even if you’ve already started claiming it. This option is not often mentioned but it’s entirely possible to ‘unretire’ and boost your income.

The amount of extra State Pension you can get will depend on when you reach State Pension age and whether you are entitled to the basic State Pension or New State Pension.

If you reached State Pension age before 6 April 2016

If you reached State Pension age before 6 April 2016, you’re eligible for the basic State Pension and you can get 1% extra for every five weeks that you delay claiming it.

This amounts to 10.4% for every full year you put it off.

So, for someone getting the full basic State Pension worth around £134 a week or £6,980 a year, delaying for 12 months will get you an extra £725 a year.

You can choose to take this extra income through higher weekly payments. Alternatively, you can go for a one-off lump sum option.

To get a one-off lump sum, you must defer for at least 12 months in a row.

The amount you get is worked out as if you had put the deferred pension into a savings account where it earned 2% above the Base Rate (which is currently 0.1%).

If you reached State Pension age on or after 6 April 2016

If you reached State Pension age on or after 6 April 2016, you can get 1% extra for every nine weeks you defer the new State Pension. This equates to a 5.8% boost if you delay for a full year.

So, for someone getting the full new State Pension of £175 a week or £9,109 annually, deferring for 52 weeks will earn an extra £10.16 a week, which is £528 per year.

Those who reach the State Pension age on or after 6 April 2016 don’t have the option of a one-off lump sum payment.

Deferring your State Pension means giving up access to your entitlement for a while in order to get a more generous payout later on.

This only really makes sense if you have alternative sources of retirement income, such as a personal or workplace pension, that can support you during those periods.

You should also consider the time it will take for deferring to pay off.

For people that qualified for the State Pension after 6 April 2016, the rate of annual increase dropped from 10.4% to 5.8%, making the offer less attractive.

In contex, those who retired after 6 April 2016 have to live for around 18 years to reap the benefit from delaying their claim for one year at the rate of 5.8%.

Those who retired before 6 April 2016 have to live around 10 years to see the benefit of deferring for one year at the rate of 10.4%.

You can defer your State Pension for as long as you like – but you must defer the whole lot.

You can choose to defer your pension even if you’ve already started claiming it.

This won’t suit everybody, but if you’re still working or have some other income, you could effectively ‘unretire’ to boost your State Pension income.

Anyone can build up extra State Pension unless they are in prison or are on certain benefits or Tax Credits.

The full Government list is here, but the key points are listed below. 

You won’t be able to build up extra State Pension when you receive:

• Income Support;
• Pension Credit;
• Employment and Support Allowance (income-related);
• Jobseeker’s Allowance (income-based);
• Universal Credit;
• Carer’s Allowance;
• Incapacity Benefit;
• Severe Disablement Allowance;
• Widow’s Pension;
• Widowed Parent’s Allowance;
• Unemployability Supplement.

Partner benefits

You also can’t get the extra boost to your State Pension during any period your partner gets:

• Income Support;
• Pension Credit;
• Universal Credit;
• Employment and Support Allowance (income-related);
• Jobseeker’s Allowance (income-related).

By taking extra State Pension as higher weekly payments, the amount you get from certain benefits could be impacted. These include:

• Income Support;
• Pension Credit;
• Universal Credit;
• Employment and Support Allowance (income-related);
• Jobseeker’s Allowance (income-related);
• Housing Benefit;
• Council Tax Reduction;
• Tax Credits.

For those that reached State Pension age before 6 April 2016 and choose to take extra income as a lump sum, Tax Credits and Universal Credit payments may also be reduced.

The extra State Pension you earn will be taxed in the same way as the rest of your State Pension.