Deferring state pension could see payments increase by 1% every nine weeks or offer a backdated payment for some
People can defer or pause their state pension even after they started claiming it (Image: GETTY)
The UK state pension age currently stands at 66, allowing individuals to access their payments from this age. However, those who choose to defer or pause their pension could potentially boost their income. This process is known as deferring the state pension.
Deferring the state pension involves choosing not to start receiving payments immediately upon reaching the state pension age. This decision can lead to an increase in the amount received in each payment when one eventually starts claiming it. According to Money Helper, for those on the new state pension, they could see a 1% increase in their weekly payments for every nine weeks they defer their pension.
For those on the basic state pension, which is set to offer around £9,615 annually next April, pausing their payments could result in a 1% increase for every five weeks.
This method is often employed by individuals who continue working past the state pension age, as it allows them to accumulate a larger pension pot for when they finally retire.
To defer your state pension, no action is required. Once you reach the state pension age and do not claim the payments, it will be automatically deferred.
Moreover, even if you have already started receiving state pension payments, it’s possible to pause these payments, offering the same benefits as deferring it from the outset.
If you postpone your state pension for under 12 months, you’ll be able to receive the missed payments as a one-off lump sum rather than boosting your weekly payments moving forward. This is known as a backdated payment.
Nevertheless, postponing state pension may not be appropriate for everyone. It can affect your entitlement to certain benefits like Winter Fuel Payments and Pension Credit. Furthermore, it could lead to pensioners being moved into a higher income tax band depending on their other earnings.
For those choosing the backdated payment route, the tax rate you’ll face is determined by your total income in the tax year each payment was initially due to be made.
Moreover, Money Helper emphasised: “Delaying or stopping your State Pension means you’ll get more when you do claim, but you’ll receive it over a shorter period.
“Your State Pension generally stops when you die, unless your husband, wife or civil partner can inherit it. The State Pension and your partner toolOpens in a new window on GOV.UK will show your options.
“This means you’ll need to weigh up if you or your partner are likely to live long enough to gain more overall.”
