Glossary · UK
What is State Pension Deferral?
Choosing to delay claiming the State Pension past State Pension age in exchange for a permanently higher weekly amount once it is eventually claimed.
Full Definition
State Pension deferral means not claiming the State Pension as soon as you reach State Pension age, in return for a higher weekly amount later. You do not need to do anything to defer -- the State Pension is not paid automatically, so simply not claiming it counts as deferring. For anyone reaching State Pension age on or after 6 April 2016 (the "new State Pension"), the rate increases by 1% for every 9 weeks of deferral, equivalent to roughly 5.8% for a full year deferred, and the extra amount is always paid as part of the ongoing weekly pension rather than as a lump sum. People who reached State Pension age before 6 April 2016 built up increases at a more generous rate (1% for every 5 weeks, around 10.4% a year) and, uniquely to that older group, could also choose to take the deferred amount as a one-off taxable lump sum instead of a higher weekly pension. Deferring can make sense for someone who is still working and would otherwise pay Income Tax on their State Pension on top of their salary, or who has other income or savings to live on in the short term and expects a long retirement over which the higher weekly rate will pay for itself. It is less likely to suit someone in poor health, since the increase is only valuable if the pension is drawn for long enough afterwards to make up for the payments foregone during deferral, and the extra income is still taxable in the normal way once the pension is eventually claimed. Deferral does not affect Pension Credit, Housing Benefit or other means-tested entitlements in the same way as taking the pension and saving it would, since a deferred, unclaimed State Pension is not counted as income or capital during the period of deferral.