The State Pension age is currently 66 for men and women across the UK, but is set to rise to 67 between 2026 and 2028 under UK Government plans. Retirement may be a while off for some people or just around the corner for others, but in this week’s MoneySavingExpert.com newsletter, founder Martin Lewis touched on whether deferring your State Pension could be worthwhile.
Deferring your State Pension, means not claiming it when you reach the official age of retirement and could boost payments of the New State Pension when you do decide to claim it. However, it’s important to note that any extra payments you get from deferring could be taxed.
The consumer champion explained: “The State Pension is boosted by 5.8% for each year you defer (you can defer part years too), so defer one year and someone on the full 'new' State Pension would gain £500 each year extra. Yet, of course, you won't be getting it for as long, and it can impact how much tax you pay.”
Martin then suggested anyone considering deferring should take a look at the comprehensive guide on MSE.com here, which covers the benefits and pitfalls of deferring.
The guidance on GOV.UK does a great job of explaining the deferral process too, including the impact on benefits.
It states that you cannot get any extra State Pension if you get certain benefits or Tax Credits and warns that deferring can also affect how much you can get in benefits.
You cannot build up extra State Pension during any period you get:
- Income Support
- Pension Credit
- Income-related Employment and Support Allowance
- Income-related Jobseeker’s Allowance
- Universal Credit
- Carer’s Allowance
- Incapacity Benefit
- Severe Disablement Allowance
- Widow’s Pension
- Widowed Parent’s Allowance
- Unemployability Supplement
You cannot build up extra State Pension during any period your partner gets:
- Income Support
- Pension Credit
- Universal Credit
- Income-related Employment and Support Allowance
- Income-related Jobseeker’s Allowance
You can find our more about the impact on benefits on GOV.UK here.
How much you could get
The amount of extra State Pension you could get depends on when you reach State Pension age.
If you reach State Pension age on or after April 6, 2016
- Your State Pension will increase every week you defer, as long as you defer for at least 9 weeks.
- Your State Pension increases by the equivalent of 1% for every 9 weeks you defer. This works out as just under 5.8% for every 52 weeks.
The extra amount is paid with your regular State Pension payment.
If you reached State Pension age before April 6, 2016
You can usually take your extra State Pension as either:
- higher weekly payments
- a one-off lump sum
When you claim your deferred State Pension, you’ll get a letter asking how you want to take your extra pension. The UK Government says you’ll have three months from receiving that letter to decide.
Higher weekly payments
Your State Pension will increase every week you defer, as long as you defer for at least five weeks.
Your State Pension increases by the equivalent of 1% for every five weeks you defer. This works out as 10.4% for every 52 weeks.
The extra amount is paid with your regular State Pension payment.
Lump sum payment
You can get a one-off lump sum payment if you defer claiming your State Pension for at least 12 months in a row. This will include interest of 2% above the Bank of England base rate.
Annual increases
After you claim your State Pension, the extra amount you get because you deferred will usually increase each year based on the Triple Lock guarantee, but it will not increase for some people who live abroad.
It’s also important to be aware that if you choose to defer your State Pension, you will need to claim Winter Fuel Payment, but you will only need to do this once.
Full details about deferring your State Pension can be found on GOV.UK here.
To keep up to date with the latest State Pension news, join our Money Saving Scotland Facebook page here, follow us on Twitter @Record_Money, or subscribe to our newsletter which goes out Monday to Friday - sign up here.
READ NEXT
- New pay rates for State Pension, PIP, Universal Credit and other DWP benefits
People over State Pension age should check for £3,500 income top-up after these seven life events
Nearly 1.4m people of State Pension age due £301 cost of living payment starting next week
People of State Pension age could be due every new cost of living payment worth up to £1,350
