Deferring your State Pension

Why Deferment?

As the UK’s population continues to age, the government is having increasing difficulty paying for retirement.  For this reason, there are several initiatives in place to encourage us to hold off on claiming our State Pensions by deferring them after we’ve passed our State Pension Age.

What is Deferring Your State Pension?

State Pension Age (SPA) is the earliest age at which State Pension can be claimed.  Yet, you do not have to claim your State Pension straight away after reaching your SPA.  Instead, once you’ve reached your SPA, you have the option of deferring your State Pension in order to claim benefit later on, on the condition that you defer for at least five weeks.

The amount of money you get from deferring your State Pension will depend on the amount of pension you have earned by your SPA, plus how long you choose to wait before claiming your pension.

There is no limit to how long you can defer your State Pension.

Who Can Defer?

This option is ideal for those who either plan to work past their SPA, or for other reasons will not be dependent on their State Pension.

Furthermore, a new reform that took force on 6 April 2010, made the Category B Pension (the Married Person’s Pension) independent of the spouse’s pension, meaning you can defer your State Pension even after your partner has taken his or hers.

If your State Pension is already in payment, you can still defer by giving up your pension for a period of time. However, this is on the condition that you are a UK resident or else a resident of the designated European countries.

Increased Income vs. Lump Sum

There are two pension deferment options which you can take advantage of.

The first is increased income; by deferring in this manner, your State Pension will increase at a rate of 1% for every five weeks you put off drawing it.  This comes to a 10.4% increase per year, and extra State Pension is payable for the rest of your life.

There is also the option of drawing a large lump sum after 12 consecutive months of deferring.  The lump sum is the equivalent of your pension plus the accrued interest of 2% above the Bank of England base rate.  The lump sum is taxable at the same rate as your other income.  Unlike the increased income option, which is payable for the rest of your life, the lump sum is a one-off payment based on the amount of State Pension you would have received.

How Do You Defer?

All weeks of deferral will count towards your extra State Pension or lump sum payment with a few exceptions.  You will not accrue extra State Pension or a lump sum whilst deferring for the following reasons:

• Any day on which you have received, or another person has received for you, Carer’s Allowance, short-term Incapacity Benefit, another type of State Pension (apart from Graduated Retirement Benefit or shared additional pension), Severe Disablement Allowance, Unemployability Supplement, Widow’s Pension, or Widowed Mother’s Allowance
• Any days you have spent in prison convicted of a criminal offense

You do not need to take action in order to defer your State Pension; your State Pension will automatically be deferred if you reach your SPA without making a claim.  When you are ready for your State Pension to begin you simply submit a BR1 claim form to the Pension Service.

Start Saving

This table compares four saving products that can help you to save more for your retirement. We have chosen products that can bring you extra money in the future. Which one to choose from, it will depend on the type of investment you want.

Provider	Product	Advantages	Disadvantages	More Info
	MoneyBuilder	• Tax free end cash pay-out • Monthly contribution starts at only £10 • Life cover included	• 15 years plan • Early “cash in” is not an option as you will lose too much
	Stocks&Shares ISA	• Returns free of Income and Capital Gains Tax under ISA rules • Monthly contribution from £30 • No restrictions on the amount of time you keep the money invested • You can transfer the ISA	• £10,680 maximum contribution in one year • It isn’t risk free
	Cash ISA	• Good online support and advising • You can transfer the ISA • They won’t charge for withdraws • You know what savings rates to expect • Tax free interest	• £5,340 maximum contribution in one year
	3 year Fixed Rate ISA	• Fixed rate, risk free • You can transfer the ISA • Tax free interest	• £5,340 maximum contribution in one year • Limited to 3 years

More Information on State Pensions

Additional State Pension

Voluntary National Insurance Contributions

State Pension for the Self Employed

Deferring your State Pension

What happens when you die?

Contracting Out

State Pension – FAQ