This article provides an overview of what you can expect to happen as you approach State Pension age along with some considerations if you’re thinking about delaying taking your pension.

No later than 2 months before you reach State Pension age, you should receive a letter and booklet from the Department of Work and Pensions explaining how to claim. When you decide you want your State Pension to begin, you need to submit a State Pension Claim Form (BR1) to the Pension Service, however if you have deferred your State Pension for a year or less, you can apply online. You can find out more by going to www.gov.uk/deferring-state-pension/how-to-claim-a-deferred-state-pension.

However, some people of pension age choose not to claim their State Pension when it becomes available (currently at the age of 66 for both men and women, and this will increase to 67 by 2028). This could be for a variety of reasons; they may still be employed and have no need to take their State Pension yet, or they may receive income from a private or company pension. Whatever you decide to do, you should ensure you understand both the risks and benefits of not drawing your pension.

The longer you delay, the more you'll receive

Deferring your State Pension could increase the payments you get when you do start to claim it (in some cases these extra payments could also be liable for tax). If you reached state pension age on or after 6 April 2016 and you delay taking your State Pension for at least nine weeks, you would be able to receive extra State Pension income when you eventually start taking it.

The amount of extra amount State Pension will depend on when you reached State pension age.

There's no option to take a lump-sum payment and your State Pension will increase by 1% for every nine weeks you put off claiming. This works out at just under 5.8% for every full year you put off claiming.

Deferring may affect how much you can receive in benefits

However, you should think carefully before deferring if you are receiving benefits, such as carer’s allowance, income support or widow’s allowance, as you can’t build up extra State Pension during any period you receive these benefits (for a full list of the benefits that may be impacted by extra State Pension, please the gov.uk/ website).

Extra income usually increases in line with inflation

If you reached your state pension age before 6 April 2016, you need to have delayed claiming your State Pension for at least five weeks. Your extra State Pension will increase at 1% for each five weeks you put off claiming for. This works out at roughly 10.4% for every full year you put off claiming. The extra income is taxable and will usually increase each year in line with inflation.

Or, rather than take the extra amount as additional income added to your State Pension, if you put off claiming your State Pension for at least 12 months in a row, you can choose to take a lump sum payment instead. This will include interest of 2% above Bank of England base rate. The lump sum is taxable at the same rate as your other income (this isn’t the case if you reached state pension age after 6 April 2016).

If you delay claiming your State Pension, or stop receiving it for a while, you won’t pay tax on it during the time you’re not getting it. The tax you pay when you start receiving the State Pension you’ve put off receiving will depend on how the money is paid to you.

Please note: This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The content of this article was accurate at the time of writing. Whilst information is considered to be true and correct at the date of publication, changes in circumstances, regulation and legislation after the time of publication may impact on the accuracy of the article.

The information in this article is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change and tax implications will be based on your individual circumstances.

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