Tens of thousands of pensioners took this option in recent years
Pensioners could boost their payments by almost £700 a year with a little-known rule. Many are unaware they can defer their State Pension, adding to its value.
The State Pension payment rises by one per cent for every nine weeks of deferral, equivalent to 5.8 per cent annually. There are approximately 13 million pensioners in the UK, and of them 42,000 claimed a previously postponed pension in 2023/24, according to data secured by Royal London through a Freedom of Information (FOI) request.
Nevertheless, as highlighted by the Daily Record, this figure declined by more than a fifth (22 per cent) from the previous year when 54,037 deferred pension claims were processed. The data revealed that one in four pensioners (10,656 individuals) had delayed their State Pension for five years or longer.
It also showed that 4,435 people postponed claiming the contributory benefit by a decade or more. The typical deferral period was four years, providing those who delayed for this duration with approximately £50 additional per week.
Postponing or deferring a State Pension means an individual has opted not to claim their State Pension upon reaching State Pension age, which is presently 66, but is scheduled to increase to 67 between April this year and 2028. The State Pension grows by one per cent for every nine weeks of deferral, equating to 5.8 per cent annually.
Those who postponed claiming their State Pension before the introduction of the New State Pension on 6 April 2016 were entitled to a more generous increase of 10.4 per cent extra per year, which continued to accumulate for the entire duration of their delay.
The figures revealed that 591 individuals hadn’t claimed their State Pension for 20 years or longer after becoming eligible to receive it.
Certain pensioners who began claiming their State Pension for the first time in 2023/24 had deferred for over three decades. The FOI request disclosed that the average deferral period amongst the 25 longest delayed claims was 32 years.
These ‘super-postponers’ originally qualified for their State Pension during 1991/92, when the eligibility age stood at 65 for men and 60 for women. In theory, most of these people would now be in their nineties, with some potentially surpassing 100 years of age.
Individuals generally defer claiming their State Pension for one of two reasons:
- To secure additional income from their State Pension upon claiming
- To minimise their current taxable income – meaning deferral can prove advantageous for higher rate taxpayers
However, whilst postponing your claim can result in substantially larger weekly payments down the line, those who choose to defer under the present system may not survive long enough to recover the funds they’ve foregone, particularly if they’re basic rate taxpayers.
For instance, someone deferring for one year from January 2026 would receive £243.60 per week in 2027, plus any Triple Lock increases along the way, meaning they’ll gain an extra £694.72 annually (before the increases).
Nevertheless, during the year they deferred, they will have forfeited nearly £12,000 of State Pension, assuming they qualified for the full new State Pension.
It’s crucial to understand that the Triple Lock uprating only applies to the base rate of the State Pension; additional elements such as deferred payment uprate in line with the September Consumer Price Inflation (CPI) rate.
If you’re a basic rate taxpayer and postpone receiving the State Pension for one year, you’d need to reach approximately 82 to benefit from the delay.For someone with taxable earnings exceeding £50,270, you’d only need to reach 79.
Commenting on the findings, Sarah Pennells, Consumer Finance Specialist at Royal London said: “With the State Pension age now at 66 and due to start rising to 67 from April, many people are only too keen to claim their State Pension.
“However, our figures show that some people, for whatever reason, are delaying getting their State Pension payments. The numbers deferring in 2023/24 have fallen quite dramatically from the previous year, which could be because fewer pensioners are able to manage without the State Pension.
“However, with the new State Pension expected to rise to just below the personal allowance from April, we could see an increase in the numbers of people with other forms of income deferring, as they look to reduce the income tax they pay.”
Ms Pennells continued: “If you’re thinking of delaying claiming your State Pension, then it’s a good idea to assess whether it is right for you. Getting the extra money may look attractive, but you are giving up the right to receive any State Pension payments until you stop deferring, and it could take years to see the benefit. The less tax you pay, the less worthwhile delaying might be.
“If someone defers their pension and then dies, their surviving spouse or civil partner will only receive the extra pension if the person who deferred reached State Pension age before 6 April 2016. These figures highlight why it’s so important to think carefully before making this decision.”
Benefits of postponing your State Pension
- Enhanced weekly payments: Each year you postpone results in a 5.8 per cent increase to your State Pension, providing you with greater income in later years
- Larger annual rises: Since annual uplifts are calculated as a percentage of your existing entitlement, a higher initial sum means more substantial yearly increases
- Tax advantages: If you remain employed upon reaching State Pension age, you’ll likely face income tax on your State Pension when combined with your wages or earnings. Postponing can help lower your tax liability by avoiding additional income during your highest-earning period
Drawbacks of postponing your State Pension
- You might never recover the lost income: Nobody can predict their lifespan, and postponing your State Pension could mean you never recoup the foregone payments
- Reduced current income: Postponing means forgoing money you could utilise immediately, which might impact your current lifestyle or savings capacity
Further information about postponing your State Pension is available on GOV.UK.
