Should You Defer Your State Pension?

As retirement approaches, one decision that might come up is whether to take your State Pension as soon as you’re eligible, or hold off for a bit longer to receive more later on.

For some, deferring can make financial sense. For others, it could mean missing out. Like most things to do with money and retirement, the right choice depends on your circumstances—your health, income, lifestyle, and plans for the future.

In this guide, we’ll walk through what deferring actually means, explore the potential upsides and downsides, and look at what some experts think. By the end, you’ll hopefully feel more confident about whichever route suits you best.

What Does Deferring Your State Pension Mean?

Deferring your State Pension simply means choosing not to take it straight away. At the time of writing, you become eligible for the State Pension at age 66, although this will gradually rise to 67 between 2026 and 2028 for those born after April 1960.

If you defer, your State Pension increases a little for each week you wait. And if you’ve already started receiving it, you can even stop your payments for a while—though you can only do this once, so it’s not a decision to take lightly.

Whether you defer before starting your pension, or put it on pause after starting it, the aim is the same: to receive a higher income later.

Why Some People Choose to Defer

There are a few reasons why deferring your State Pension might work in your favour.

A Higher Income in the Long Run

The longer you defer, the more your pension increases. If you reach State Pension age after 6 April 2016 (which most people now do), the increase works out at just under 1% for every 9 weeks of delay. That adds up to about 5.8% extra per year.

To put that into context: if you’re entitled to the full new State Pension, which is currently £221.20 a week, deferring for one year would increase your payments by around £614 per year for life. If the State Pension rate rises in the meantime—as it often does—your eventual income could be even higher.

If you reached State Pension age before April 2016, slightly different rules apply. You may be able to take your extra pension as a lump sum instead of higher weekly payments—provided you’ve deferred for at least 12 months. That lump sum includes interest and is taxed at your current rate.

Helping to Manage Your Tax Bill

If you’re still working and drawing a salary when you hit State Pension age, starting your pension straight away might push you into a higher tax bracket.

For example, say you earn £45,000 a year. Adding £11,500 of State Pension income could lift your total earnings over the higher-rate tax threshold, meaning you’d pay 40% tax on a portion of your income.

By deferring until you stop working, you may avoid this problem and pay less tax overall. The pension income would be added to a smaller annual income, keeping it within the basic rate bracket.

Just keep in mind: although deferring can help reduce your tax now, a higher pension in future may still affect your tax position later on. It’s worth running the numbers, especially if you expect other sources of retirement income to kick in further down the line.

The Drawbacks of Deferring

Of course, deferring isn’t the right choice for everyone. It’s important to consider not just the benefits, but also what you might give up by waiting.

The ‘Cost of Delay’

Delaying your State Pension means you’re giving up income now in exchange for more later. But how long would it take to catch up?

Let’s say you’re 66, eligible for the full State Pension of £10,600 a year, and you choose to defer for 12 months. You’d miss out on that first year’s payments—but your future pension would go up by £614 a year.

To recoup the £10,600 you gave up, you’d need to live for another 17 years, reaching at least age 84. That’s not an unreasonable life expectancy, but it does mean you need to live long enough to make the deferral worthwhile.

If you were to pass away before that age, you’d end up having lost money overall. And of course, life expectancy is something none of us can guarantee.

Possible Impact on Pension Credit and Other Benefits

Another issue to consider is how a higher State Pension might affect your eligibility for means-tested benefits like Pension Credit.

Pension Credit can be a financial lifeline, especially for those on lower incomes. It also opens the door to valuable extras like Council Tax reductions, free NHS dental treatment, and help with heating bills or TV licences.

If your pension income goes up because you deferred, it might push you just over the threshold for these benefits. So while you’d be getting more from your State Pension, you might lose out elsewhere.

It’s not always a straightforward trade-off, so it’s worth checking how any increase in income could affect your overall entitlements.

Some Benefits Cancel Out the Increase

There are also certain State benefits that mean deferring won’t boost your pension at all. If you or your partner receive any of the following, your pension won’t increase while you defer:

• Pension Credit
• Universal Credit
• Income Support
• Employment and Support Allowance
• Jobseeker’s Allowance

In addition, if you’re receiving other benefits such as Carer’s Allowance, Incapacity Benefit, or Widowed Parent’s Allowance, deferring won’t increase your payments either.

If you’re unsure how your benefits might be affected, it’s a good idea to speak with your local Jobcentre Plus or get advice from a pension specialist.

What the Experts Say

Since deferring your pension involves weighing up short-term loss against long-term gain, many experts agree that your health and life expectancy are key considerations.

Sir Steve Webb (Former Pensions Minister)

Steve Webb explains that the system is designed to be fair on average. In other words, whether you defer or not, most people will receive roughly the same total pension income over time.

But, he points out, some people may come out ahead—particularly if they’re in good health and expect to enjoy a long retirement. Others, especially those with health concerns or a shorter life expectancy, may not recoup what they’ve missed.

Clare Casalis (MoneySavingExpert)

Clare highlights the tax aspect of deferring. Her view is that one of the strongest reasons to delay claiming your State Pension is if you’re still earning and likely to move into a lower tax bracket later on.

If you can wait until your income drops—such as after you’ve stopped working—you may end up keeping more of your pension overall.

How to Defer (or Pause) Your State Pension

If you’re about to reach State Pension age and want to defer, the process is simple: just don’t claim it yet. The government will assume you’re choosing to delay, and your pension will start increasing automatically in the background.

Later, when you’re ready to start receiving payments, you can apply online via the Pension Service, or fill out a BR1 claim form.

If you’re already receiving the State Pension but want to stop and restart it later, that’s also possible—but remember, you can only do this once. To pause your payments, contact the Pension Service either online or by phone on 0800 731 0469, Monday to Friday, 8am to 6pm.