Two-thirds of people aged 40 to 65 don’t know they can increase their state pension by deferring when they start claiming it, according to analysis by Just Group of recent government data.
The data reveals that among those who are aware of the option, many misunderstand how it works. A third are unsure of the financial impact, and 8 per cent incorrectly believe they would get the same or less money by deferring.
But only 10 per cent of adults aged 66 to 75 say they deferred claiming their pension. Most of those who did either didn’t need the money immediately or were aiming for a higher income by waiting.
Additionally, people who reach state pension age after 6 April 2016 can increase their income by around 5.8 per cent for every year they defer. The full new state pension is £230.25 a week in 2024/25 and deferring for a year would increase weekly payments by £13.35, adding £694.20 annually for life.
Meanwhile, those who reached pension age before that date get a more generous rate. Deferring for a year increases income by 10.4 per cent, or £954.20, which can be taken either as extra weekly payments or a lump sum.
Just Group group communications director Stephen Lowe says: “Deferring your State Pension is effectively a trade-off between receiving your full State Pension payments today or an increased State Pension later.
“Delaying the State Pension may not work for everybody but it’s certainly an option worth knowing about and exploring in more detail for those people who don’t need the money immediately. If you’re still working, deferring could help reduce your income tax bill in the short term and boost your pension income in later years when it may be needed more.
“The decision requires careful thought. It takes around 17 years to break even if you defer the State Pension for a year so health and life expectancy are key considerations when weighing up whether you could benefit. Currently, any extra income accrued through deferring the State Pension offers protection against inflation – a valuable safeguard for those planning for a long retirement.
“Anyone who is unsure of their options can find further guidance from a range of sources. The Government’s free and impartial Pension Wise service is a good place to start while regulated financial advice remains the gold-standard.”