Deferring State Pension

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You not have to draw your State Pension when you reach State Pension age as you can defer it. By deferring, you increase worth of your State Pension.

You do not have to be working to defer their pension. Indeed, if you start to draw your pension, you can change your mind and defer it, but they can only do this once.

How do you defer?

You defer by not claiming your State Pension.

If you have begun to draw your pension, you can only defer it by notifying the Pension Service in writing or by telephone. This is known as ‘de-retirement’. You can de-retire anytime after reaching pension age. A person canYou can cancel your decision to de-retire but cannot resume de-retirement thereafter.

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Deferring Before 6th April 2005

If you deferred their state pension for at least 7 weeks before 6th of April 2005, then for that period it was increased by about 7.5% for each year of deferment.  

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Deferring After 6th April 2005

New rules were introduced in April 2005 to provide greater incentives for people to defer claiming their State Pension. Under the new rules there are two options available to people who defer their state pensions:

  • Extra State Pension
  • Lump sum payment

 Extra State Pension

You can earn extra state pension at 1% for every five weeks you put off claiming. This means that your pension is increased by about 10.4% for each year you do not draw it.

Lump Sum Payment

You can choose to take a lump sum rather than an increased rate of pension. The amount of the lump sum is the amount of State Pension not claimed plus interest which will be added each week and compounded. The rate will be roughly 2% above the Bank of England's base rate at your date of entitlement.

You will have to put off claiming your State Pension for at least 12 consecutive months to have the choice of a lump sum payment. If you defer for less than a year, you will not receive interest payments but can have your backdated pension paid in arrears.

You lump sum will be taxed in the tax year in which you claim your deferred pension or, in certain circumstances, the following year. The tax rate on the lump sum will not exceed the rate at which you are already paying income tax.


Please Remember

In order to decide whether to defer or take the pension straight away, you need to consider what effect either course of action will have on your tax liability and entitlement to state benefits.

Find out about your choices from NI Direct

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