Deferring the UK State Pension: how it grows

Retiring need not coincide with the moment you stop working. If you do not yet need the pension, you can defer it and get more later.

How does the pension grow when deferred?

For the new State Pension the rule is: for every 9 weeks you defer, 1% is added to your weekly payment — for life. A full year (52 weeks) adds just under 5.8%. You must defer at least 9 weeks or there is no increase. Example: on the full pension of £241.30 a week, deferring for a year gives about £13.99 a week extra.

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Do you need to do anything to defer?

No. If you simply do not claim at pension age, the pension is deferred automatically. When you decide to take it, you claim, and the increase is already built into the higher regular payments.

When is deferring a bad idea?

The increase is taxed like the rest of your pension, so tax can eat some of the gain if you have other income. Also, you cannot build up extra pension for periods when you or your partner get certain benefits, or for time spent in prison. For those who expect a long retirement, deferring often pays; for those in poor health or who need the money now, it usually does not.

How do you decide?

Before deferring, work out how many years the higher pension takes to make up the payments you forgo, and allow for tax and any effect on benefits. The rules are different for those who reached pension age before 6 April 2016 — deferral is calculated differently there. Details and examples are on GOV.UK.

How do you work out whether to defer?

Estimate the "break-even point": how many years the higher pension takes to return what you gave up during deferral. Roughly, at about 5.8% extra for a year deferred, break-even comes after about 17–20 years of drawing the pension (before tax). So deferring more often suits those in good health expecting a long retirement, and less often those who need the money now.

What other points matter?

The increase is subject to income tax, and if you have other income some of the gain goes in tax. During deferral you cannot build up the increase for periods when you or your partner get certain benefits (such as Pension Credit), or for time in prison. The rules for those who reached pension age before 6 April 2016 are different — a lump sum can be possible there. If unsure, work out both scenarios and get advice if needed.