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With life expectancy rising, and many people spending decades in retirement, it’s never been more important to understand how to manage and maximise your State Pension.
Below, we look at what it means to defer your State Pension, how to go about it and some important factors to consider before you go ahead.
Deciding to defer your State Pension is complex, so before you make a decision, it can be useful to get financial advice.
What is a deferred State Pension?
When you reach State Pension age, you don’t start receiving the State Pension automatically. You’ll get a letter from the Government two months before, giving you the option either to start claiming it or to defer it.
Deferring your State Pension simply means you’re delaying or postponing the start date of your pension payments. By deferring your payments, you’ll receive higher weekly sums in the future, but it isn’t without risk.
How does deferring the State Pension work?
The maximum weekly State Pension you can receive is currently £241.30 (£12,548 a year) for the 2026/27 tax year. This amount usually rises annually based on what’s known as “the triple lock” – the higher figure of inflation, earnings growth or 2.5%.
This means that next year, the State Pension is likely to rise by earnings growth at 3.9%, as this is expected to be the highest of the three. You can read more about this in our guide What is the pension triple lock?
You don’t need to do anything to defer taking your State Pension; it will automatically be deferred if you don’t claim it. You can also defer your pension for as long as you like.
Does a deferred State Pension increase in value?
Yes, the longer you defer your State Pension, the higher your weekly payments to live on as you get older, but the greater the risk that you might not live long enough to see the benefits.
How much will I get when I claim my deferred State Pension?
If you reach State Pension age on or after 6 April 2016, your State Pension will increase by 1% for every nine weeks you defer claiming it. This works out at just under 5.8% for every full year you defer. The extra amount is added to your regular State Pension payments for life.
For example, if you are entitled to the full new State Pension of £241.30 a week in 2026/27, deferring it for 52 weeks would increase your weekly payments by around £13.99, taking your weekly State Pension to around £255.29, before any future annual increases.
The extra amount you receive because you deferred your State Pension will usually increase each year in line with inflation after you start claiming it.
People who reached State Pension age before 6 April 2016 are under the old deferral rules. They can get a substantially higher increase of 1% for every five weeks deferred (10.4% for a year), and some can opt for a lump sum.
Deferring the State Pension – should you do it?
Deferral is a very personal decision. Three important things that you need to consider are life expectancy, tax implications and the impact on any other benefits you are receiving.
Life expectancy
If you decide to defer your State Pension for one year and you are entitled to the full new State Pension, you would forgo up to £12,547.60 in payments at 2026/27 rates.
In return, your weekly State Pension would increase by just under 5.8% for life. Based on the 2026/27 full new State Pension of £241.30 a week, this would give you an extra £13.99 a week, or around £727 a year.
Ignoring future increases, tax and other factors, it would take around 17 years of receiving the higher payments to make up for the year of State Pension payments you gave up. The Government says it takes more than 15 years to recoup 52 weeks of deferred full new State Pension.
The latest figures from the Office for National Statistics show that someone aged 65 can expect to live for a further 18.7 years on average if they are male, or 21.2 years if they are female.
However, average life expectancy should not be taken as a guarantee that deferring will pay off financially. Your own health, family history and financial circumstances are important factors to consider. For example, if you have a shorter-than-average life expectancy or need the income to meet your living costs, taking your State Pension rather than deferring it may be more appropriate. Conversely, if you expect to live well beyond the break-even point and can afford to go without the income initially, the higher lifelong payments may be attractive.
What is the effect of deferral on tax?
Any money you earn on top of your State Pension that pushes you above the income tax-free annual allowance, will be taxed according to which tax band it falls into.
For example, if you decide to continue working past state retirement age and your earnings mean that you pay income tax at 20%, then any extra money you make from your pension will also be taxed at this rate.
You should think about this when considering deferral as it could make sense to defer your State Pension until you have stopped earning to reduce the amount of tax you pay. The right decision for you will depend on your individual circumstances and how much you are earning.
The tax considerations can have quite a profound impact on the merits of deferring your State Pension so if you’re unsure, we would recommend you speak to a qualified financial advisor who will be able to help you make the right decision for your circumstances.
What happens if my tax rates change?
If your income from other sources increases once you reach state retirement age, perhaps because you’ve continued working and have received a pay rise, or because you’re receiving income from a buy-to-let property, and this pushes you into a higher tax bracket, any extra money you receive from your pension will be taxed at this rate.
That means if you were previously paying income tax at 20%, but are now a higher or additional rate taxpayer paying tax at 40% or 45%, you’ll have to pay tax on additional money made from your pension at this rate.
As mentioned above, if you’re not sure whether deferring your State Pension is right for you, it’s important to seek financial advice.
Overlap with other Government benefits
The overlap with other state benefits can be quite complex. For example, typically you can’t build up any extra State Pension for the future by deferring it when you’re still receiving other state benefits such as Carer’s Allowance, Pension Credit or Income Support. Your ability to delay taking your pension and boost your future pension payments can also be impacted if your partner receives certain benefits.
Similarly, the extra amount you receive in future years from deferring your State Pension will count as income, and therefore will count against any state benefits you receive in future. For example, if you receive Pension Credit, Housing Benefit or Council Tax support then these may be reduced due to the extra income you are getting.
It’s a complex area, and everyone’s circumstances are different, but if you are, or have a partner who is receiving other Government benefits, you’ll need to think very carefully whether deferring your State Pension will benefit you. You can find more information on how deferring your State Pension impacts other Government benefits on the Government’s website here.
I’ve already started taking my pension. Can I defer it now?
If you’ve already started taking your State Pension but now realise you’d like to defer it then you can. You’ll get the same terms as if you’d not started claiming it.
This may be particularly useful if you have continued working after retirement and don’t need to draw on your State Pension yet, or you want to wait until you have fully stopped working before you claim it.
Finally...
Many of us won’t have the luxury of being able to decide whether we defer the State Pension or not as we need the income now. If you are fortunate enough to have a choice, it can be a complex decision to make.
Ultimately you need to consider your own personal circumstances, think about your health and lifestyle and make an informed decision on whether you can afford to do without the State Pension payments in the short term and whether you really will benefit from deferral in the long run.
For more information on deferring your State Pension, you can visit the government website here.
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