Deferring Your State Pension

What Is State Pension Deferral?

Deferral means delaying your State Pension claim beyond your State Pension age. In exchange for waiting, your pension increases permanently.

Key facts:

• You don't have to claim when you reach State Pension age
• Every 9 weeks you defer increases your pension by 1%
• This works out to approximately 5.8% per year
• The increase is permanent and for life
• Your increased pension continues to get annual uprating
• There's no maximum deferral period

How Much Does Your Pension Increase?

The Formula

For every 9 weeks you defer, your State Pension increases by 1%.

Increase = (Weeks deferred ÷ 9) × 1%

Common Deferral Periods

*Based on full State Pension of £230.25/week for 2025/26

Understanding the Trade-Off

Deferring involves a trade-off:

• You give up: Pension payments during the deferral period
• You gain: A higher weekly payment for the rest of your life

Example: Deferring for 1 Year

If you have the full State Pension (£230.25/week) and defer for 52 weeks:

What you give up:

• 52 weeks × £230.25 = £11,973

What you gain:

• Increase: 5.78%
• New weekly amount: £243.57 (instead of £230.25)
• Extra per week: £13.32
• Extra per year: £693 (52 × £13.32)

Break-even point:

• £11,973 ÷ £693 = 17.3 years
• If your State Pension age is 66, you need to live to age 83+ to benefit financially

When Deferral Makes Sense

Good Reasons to Defer

• You're still working - And don't need the State Pension income yet
• You have other income sources - Salary, private pension, savings
• You're in good health - And expect to live well beyond the break-even point
• You want higher guaranteed income later - When you might be more dependent on it
• Tax efficiency - Current income puts you in a higher tax bracket, but you expect lower income later
• You value certainty - State Pension is a guaranteed income that rises with inflation

When NOT to Defer

• You need the money now - State Pension provides essential income
• You have health concerns - Shorter life expectancy means you may not reach break-even
• You can invest for better returns - If you're confident you can achieve >5.8% annual returns elsewhere
• You prefer money now - You'd rather have flexibility to spend or invest as you choose
• You're already very old - Break-even becomes harder to reach

Important Considerations

Life Expectancy

The key factor in deferral decisions is how long you'll live. Consider:

• Average life expectancy - Currently around 79 for men, 83 for women in the UK
• Your personal health - Family history, lifestyle, medical conditions
• Break-even age - Whether you're likely to live beyond it

For a 1-year deferral, break-even is typically 17-18 years after State Pension age. If you reach State Pension age at 66, this means living to 83-84.

Tax Implications

State Pension is taxable income. When considering deferral, think about:

• Current tax position - If you're working and near a tax threshold, claiming now could push you into a higher bracket
• Future tax position - When you retire fully, your income may be lower, making the extra pension more valuable
• Personal Allowance - If your total income is below £12,570 (2025/26), State Pension is tax-free anyway

Comparison with Other Options

The 5.8% annual increase from deferral should be compared with:

• Savings interest rates - Currently 4-5% in high-interest accounts
• Investment returns - Long-term stock market returns around 7-8% historically (but with risk)
• Annuity rates - What you could buy with the deferred payments

Advantages of State Pension deferral:

• Guaranteed increase (no investment risk)
• Inflation-protected through annual uprating
• Lasts for life (longevity protection)
• Spouse may inherit some increase

Inflation Protection

Your increased State Pension continues to receive annual increases based on the Triple Lock:

• The higher of: earnings growth, inflation (CPI), or 2.5%
• This means your deferred pension keeps pace with the cost of living
• Unlike many private pensions, the real value doesn't erode over time

How Deferral Works in Practice

You Don't Have to Decide Immediately

When you reach State Pension age:

• You don't automatically start receiving payments
• You must make a claim to start getting your pension
• If you don't claim, you're automatically deferring
• You can claim at any time - there's no deadline

You Can Change Your Mind

• Before you claim: You can stop deferring and claim at any time
• After you claim: You cannot go back and defer again (the decision is final once claiming starts)

Partial Deferral

It's all or nothing - you cannot defer part of your State Pension while claiming the rest. You must either:

• Claim your full State Pension, or
• Defer the entire amount

New vs Old State Pension Rules

New State Pension (From 6 April 2016)

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

• Deferral increases your weekly payment by 1% per 9 weeks
• No lump sum option - You can only take the increase as higher weekly payments
• The increase applies from your first payment and continues for life

Old State Pension (Before 6 April 2016)

If you reached State Pension age before 6 April 2016, different rules apply:

• Deferral increases weekly payment by 1% per 5 weeks (10.4% per year - more generous)
• If you defer for 12+ months, you can choose between:
  • Higher weekly payments for life, or
  • A taxable lump sum plus normal weekly payments

This guide focuses on the new State Pension. If you reached State Pension age before April 2016, contact the Pension Service for advice specific to your situation.

Real-World Scenarios

Scenario 1: Still Working

Margaret, age 66:

• Reaches State Pension age but still working part-time
• Earning £18,000/year from work
• Full State Pension entitlement: £11,973/year
• Total income if claiming now: £29,973

Decision: Defer for 2 years until she finishes work at 68

• Gives up: £11,973 × 2 = £23,946
• Gains: 11.56% increase = £270.15/week (£14,058/year)
• Extra per year after claiming: £2,085
• Break-even: £23,946 ÷ £2,085 = 11.5 years (age 79.5)

Benefits for Margaret:

• Avoids higher tax while working
• Higher guaranteed income when fully retired
• Reasonable break-even given average life expectancy

Scenario 2: Good Private Pension

David, age 66:

• Retired with good private pension of £25,000/year
• Some savings providing additional income
• In excellent health, family history of longevity

Decision: Defer for 3 years to age 69

• Gives up: £11,973 × 3 = £35,919
• Gains: 17.33% increase = £270.15/week (£14,048/year)
• Extra per year: £2,075
• Break-even: 17.3 years (age 86.3)

Benefits for David:

• Values guaranteed inflation-protected income in later years
• Private pension might run out or lose value; State Pension is for life
• Family history suggests he'll likely live beyond 86

Scenario 3: Needs Income Now

Susan, age 66:

• Stopped working, no other significant income
• Small private pension of £3,000/year
• Needs State Pension to meet living costs

Decision: Claim immediately, don't defer

• Needs the income for essential expenses
• Cannot afford to wait for payments
• Guaranteed income now is more valuable than uncertain higher income in future

How to Defer

Automatic Deferral

You don't need to do anything special to defer. Simply:

• Don't claim your State Pension when you reach State Pension age
• DWP will automatically track your deferral
• When you're ready to claim, contact them

Claiming After Deferral

When you're ready to start receiving your increased pension:

1. Call the Pension Service on 0800 731 0469
2. Or claim online through your Government Gateway account
3. They'll calculate your increase based on how long you've deferred
4. Your first payment will include the increased amount
5. The increase continues for all future payments

Getting Advice

Before deciding to defer, consider:

• Using the Deferral Calculator to see your numbers
• Checking your State Pension forecast at gov.uk/check-state-pension
• Speaking to the Future Pension Centre: 0800 731 0175
• Getting financial advice if you have complex circumstances

Common Questions

Can I take some now and defer some?

No. You must defer your entire State Pension or claim all of it. There's no partial deferral option.

What happens if I die during deferral?

If you die before claiming, you don't receive any State Pension. However, your spouse or civil partner may be able to inherit some increase in their State Pension based on your NI record.

Does deferral affect other benefits?

Yes, it can. If you're entitled to means-tested benefits like Pension Credit, deferring your State Pension could increase your entitlement to these benefits in the short term. However, this is complex - seek advice if you receive benefits.

Can I defer if I'm already receiving a private pension?

Yes. Deferring your State Pension is independent of any private or workplace pensions you might be receiving.

Is there a maximum deferral period?

No, you can defer for as long as you like. However, the longer you defer, the higher the break-even age becomes.

What if I change my mind after starting to claim?

Once you start claiming, you cannot stop and defer again. The decision to claim is final. However, you can suspend your pension in certain circumstances (such as returning to work after initially retiring), but this doesn't give you a deferral increase.