Should I defer taking my state pension?
You could save hundreds in tax if you're still earning
You don't have to take your state pension when you hit state pension age, currently age 66. If you defer it, you'll get paid a higher amount when you do decide to claim – up to 5.8% a year more in fact. But you'll receive it for a shorter time. Whether it adds up for you will depend on how likely you are to live and your income, so here's what you need to consider.
What is 'deferring' the state pension?
You don't have to take your state pension as soon as you're entitled to it, which is currently when you reach age 66 for both men and women (rising to 67 between 2026 and 2028, and 68 between 2044 and 2046). In fact, if you don't actively claim your state pension, it'll be automatically deferred.
By not claiming your pension when you're entitled to it, you're forgoing income from the state. To compensate for this, you'll get a bigger state pension amount when you do choose to claim it.
Defer your state pension, and the maths works out that if you live longer than typical life expectancy, you'll gain; if you live less, you'll lose. Live a typical lifespan and it'll be pretty neutral.
So if you're in poor health, it's not really worth considering. If you're in great health with a history of family longevity, deferring could be a winner.
Otherwise the real issue is tax – if you're earning or have a decent income now, but'll pay tax at a lower rate later on, then deferring can be very worthwhile.
Already started claiming your state pension? You can still defer
If you've already started receiving your state pension, you can opt to stop receiving it for a time, for example if you're going back in to the workplace for a few years. But you can only do this once – in other words, you can't start receiving it then stop receiving it, then start and stop it again.
How much extra do I get if I defer?
As long as you defer for at least nine weeks, then your weekly state pension will increase:
For every 9 weeks you defer, you'll get an extra 1%, which is around an extra £2.30 a week.
If you defer for a full year, you get 5.8% extra, which is £13.35 a week.
On current figures, a one year deferral would net you an extra £694 a year on your state pension, for life. Yet, do note that to get this, you'll have given up £11,978 in state pension that you could have claimed in the first year.
In general, if you defer for any amount of time, you'd need to live for around 20 years after taking your state pension to even out the amounts... which is around the time an average 66 year old is expected to live.
The longer you live, the more you gain
This is very relevant to the choice of whether to defer.
If you're in poor health and worried about life expectancy, then deferring isn't likely to help as you're less likely to hit the 20-year breakeven point.
Yet if you're in good health and feel reasonably confident about your life expectancy, then you might beat the odds and profit.
There's no crystal ball on this, though the Office for National Statistics has a 'What is my life expectancy?' calculator. It shows that on average a man aged 65 has 20 years to live and a woman aged 65 has 23 years.
Yet living longer isn't the only reason to defer (or not as the case may be), it'll also depend on your income now – and in the future.
If you're still working or have a decent income, deferring could make sense for tax reasons – especially if you're likely to be liable for less tax in future.
Conversely, if you're a on a lower income and are entitled to pension credit or other benefits, deferring might not be worth it. We explain more below.
Still earning? A good reason to defer is if you'll pay less tax later on
If you're 65 and still have an income (perhaps because you're still working), yet are likely to drop a tax bracket later (when you actually retire, for example) – then this is the real boon of deferring your state pension.
The state pension counts as taxable income, so add it to your regular income and it's taxed at your highest tax rate, whether that's 20%, 40% or 45% (rates in Scotland differ, but the principle's the same).
Yet if you don't NEED the extra income now, and you know you'll drop a tax bracket once you do stop working, it's definitely worth considering deferring your state pension, and claiming it once you're in that lower tax bracket.
That way you get to keep more of your state pension, as well as benefit from the extra payments.
Entitled to Pension Credit? Deferring might not make sense
Pension Credit is a benefit for people on low incomes over state pension age. If you're single and have a weekly income below £227, or in a couple and have a weekly income below £346, you could qualify and get the 'guarantee' part of Pension Credit to top up you up to these weekly amounts.
Yet if by deferring your state pension it means you earn over the Pension Credit cut-off amount (even by just a penny), you could miss out on this vital pension top-up that you'd otherwise have been eligible for.
As mentioned above, for every year you defer, you could get increase your state pension by an £694 a year – for life. So if you're thinking of deferring yet are likely to be on a low income when you get to state pension age, you need to consider whether that extra state pension could disqualify you from Pension Credit.
Pension Credit is about more than just the pension top-up
Even if you're only entitled to a small amount of Pension Credit (some people only get a few pounds), it's still worth claiming as it means you can automatically qualify for £1,000s worth of other benefits, discounts and perks.
For all the ins and outs see our "pension credit - what help can I get?" guide.
Confused about what you might be entitled to, take 10 mins to do our benefit checker to see what you are entitled to.
On other benefits? You won't benefit from deferring
If you or your partner are in receipt of any of the following benefits it's simply not worth delaying when you claim state pension, as you won't get the extra 5.8% a year by deferring. You'll simply get the amount shown on your state pension forecast.
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Income Support
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Employment and Support Allowance (income-related)
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Jobseeker’s Allowance (income-based)
In addition, you can't get extra state pension by deferring if you get any of the following:
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Carer’s Allowance
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Incapacity Benefit
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Severe Disablement Allowance
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Widow’s Pension
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Widowed Parent’s Allowance
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Unemployability Supplement
If you need help understanding how your benefits might be affected by receiving or deferring your state pension, contact your local Jobcentre Plus.
Quick question
Yes, if you defer your state pension, you need to claim the winter fuel payment but you only need to do this once.
Do I need to claim the winter fuel payment if I defer taking my state pen
What happens if I die while deferring my state pension?
What will happen will depend on whether you fall under the old or new pension system:
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If you reach state pension age ON or AFTER 6 April 2016 (the ‘new’ system) and have delayed or stopped claiming your state pension for a while, your spouse or civil partner won’t inherit any of the ‘extra’ state pension that you’ve built up. Instead, the beneficiaries of your estate will receive three months' backdated state pension.
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If you reached State Pension age BEFORE 6 April 2016 (the ‘old’ system) and you die while deferring your state pension (or are claiming your deferred state pension when you die), your partner might be able to inherit part or all the ‘extra’ state pension or lump sum you’ve built up. You and your partner must be in a marriage or civil partnership at the time of your death.
How else can I boost my state pension?
There are a couple of other ways you may be able to increase your state pension amount:
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By claiming free pension-boosting national insurance credits to fill gaps in your national insurance record. The most common one is claiming Grandparents' childcare credits. Read our NI contributions guide, which lists all the other scenarios where you could potentially be missing out on free NI credits
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Buy 'extra' pension years. If you've got spare cash, it's possible to buy some missing national insurance qualifying years, which could turn £824 into £5,500 in your state pension. To find out if you can benefit from this and if it's right for you, see our guide to voluntary national insurance contributions.
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