Deferring Your State Pension

You do not have to claim your State Pension as soon as you reach your State Pension Age (SPA), you can choose to defer it to enable you receive a higher weekly amount (known as Extra State Pension) or the option of a one-off taxable lump sum payment instead.

Pension Deferral Choices

1. Extra State Pension

If you defer your State Pension for a minimum of 5 weeks, you can earn an increase to your State Pension of 1% for every 5 weeks you put off claiming, which equates to 10.4% extra for each year you defer. For example, if your State Pension was £100 a week and you decided to delay drawing it for 4 years, the pension you would then receive would be £141.60 a week.

If you decide to opt for an extra state pension, it is payable for the rest of your life. It will be subject to income tax in the normal way, and will also be treated like any other income for the purposes of calculating the Pension Credit.

2. Lump Sum Payment

If you defer your State Pension for a minimum of 12 consecutive months, you can choose to receive your State Pension paid at the normal rate, but with a one-off lump sum payment. The lump sum will equal the amount of pension you would have received plus interest. The rate of interest used equates to 2% above the Bank of England base rate. For example, if your State Pension was £100 a week and you decided to delay drawing it for 4 years, the pension you would then receive would be £100 a week, but you would receive a lump sum of about £22,000 (before tax). This assumes the base rate was 1.5% (and therefore the rate applying was 3.5%) for the entire 4 years.

The lump sum is subject to tax, although you will not pay a higher rate on the lump sum than you will pay on other income you receive in the tax year the lump sum is paid. The lump sum is ignored for Pension Credit, Housing Benefit or Council Tax Benefit.

How to Defer Your State Pension

If you have not yet claimed your State Pension, you do not need to do anything in order to make a deferral; by not making a claim, your State Pension will automatically be deferred. However, if you are already claiming another social security benefit, then you will need to tell the Pension Service that you want to defer. When you want your State Pension to begin, you need to submit a BR1 claim form to the Pension Service.

If you are already receiving your State Pension, you may stop claiming it to earn extra State Pension or a lump sum payment. You can do this by contacting your local pension centre.

If you reached State Pension age before April 2005, and have deferred your pension, then you will receive an increase for the period up to 6 April 2005 based on the old rate of extra State Pension (about 7.5% for a whole year). For any further period of deferral after that date, you will be eligible either for an increase based on the new extra State Pension rate (10.4% for a whole year) or, if you continue to put off claiming for a further 12 months, a lump sum payment.