Recent figures from the Department for Work and Pensions (DWP) show that a large number of people remain unaware that they can defer their State Pension to receive higher payments later in life.
A study conducted by Just Group, a retirement specialist, found that 66% of individuals aged 40–65 did not know they could postpone their claim beyond the official State Pension age.
Among the 34% who were aware, one in three (33%) were unclear about the impact of deferral on their payments, while another 8% believed they would receive either the same or even less income.
Current Deferral Trends
Despite the potential advantages, the actual number of people deferring is relatively low. Data reveals that only 10% of adults aged 66–75 have chosen to delay claiming their contributory State Pension.
Why People Choose to Defer
When asked about their reasons:
- 49% said they did not need to claim immediately for financial reasons.
- 48% deferred because they wanted higher future income.
- 20% preferred to wait until they fully retired from work before claiming.
Benefits of Deferring State Pension
Deferring the New State Pension results in a 1% increase every nine weeks, which is equal to about 5.8% extra income per year.
For those deferring in the 2025/26 financial year, this could translate into an extra £13.35 per week—adding up to £694.20 annually for life, along with inflation-linked increases.
Expert Insight
Stephen Lowe, Group Communications Director at Just Group, explained:
“Deferring your State Pension is essentially a choice between taking full payments now or receiving higher income later. While it isn’t suitable for everyone, those who don’t need the money immediately should consider it carefully.”
He also noted that it takes about 17 years to break even if you defer for one year, meaning health and life expectancy are crucial factors to weigh before making the decision.
State Pension Rates for 2025/26
Here’s a breakdown of the upcoming rates:
| Pension Type | Weekly Payment | Four-Weekly Payment | Annual Amount |
|---|---|---|---|
| Full New State Pension | £230.25 | £921.00 | £11,973 |
| Full Basic Pension | £176.45 | £705.80 | £9,175 |
Future State Pension Increases
The Labour Government has pledged to uphold the Triple Lock for the next five years. Forecasts suggest:
- 2025/26 – 4.1% increase (slightly higher than 4% forecast)
- 2026/27 – 2.5% increase
- 2027/28 – 2.5% increase
- 2028/29 – 2.5% increase
- 2029/30 – 2.5% increase
Tax Considerations for State Pension
The Personal Allowance will remain frozen at £12,570 until April 2028.
- Someone relying solely on the full New State Pension will not pay income tax for the next two years.
- However, those with additional income (private pensions, work, or other earnings) may owe tax.
- Importantly, tax applies only to the amount exceeding the personal allowance, not the entire pension.
- Extra income that pushes recipients above the threshold in 2025/26 will lead to a tax bill issued by HMRC in July 2026, as taxes are paid a year in arrears.
Deferring the State Pension can provide a substantial long-term boost to retirement income, but it’s not a one-size-fits-all strategy.
While many people remain unaware of this option, those with stable financial resources and good health may find significant benefits by delaying their claim. The decision ultimately hinges on individual financial needs, life expectancy, and retirement plans.
FAQs
How much extra can I earn by deferring my State Pension?
Deferring adds around 5.8% per year. For 2025/26, this equates to about £694.20 annually for life.
Is deferring the State Pension suitable for everyone?
Not necessarily. While it benefits those with financial flexibility and longer life expectancy, it may not suit those needing immediate income.
When would I start paying tax on my State Pension?
You’ll only pay income tax if your total income exceeds the £12,570 allowance, with bills issued by HMRC the following year.