Should you defer taking your State Pension?

Can delaying your benefits make you richer?

Should you defer taking the State Pension?

At present, the maximum State Pension you can receive if you take it when you reach retirement age is £159.55 a week.

But if you don't need it straight away, you can defer - or delay - taking it, and receive a higher amount of pension per week when you do start claiming.

See also: Will your money run out before you die?

See also: State pension age for women is rising

For every nine weeks you put off taking your payments, they go up by 1%. Delay for a whole year, and the payments you get will increase by just under 5.8%.

In cash terms, this means you will receive an extra £479 a year, on top of the £8,296.60 received by those who take the State Pension straight away.

That's less than you used to get. For those who hit retirement age before 6 April last year, the percentage increase available on deferral was 10.4% a year.

But 5.8% is still a lot better than the rate of interest you can get in any easy access savings account on the market at the moment.

So should you defer your State Pension? Let's find out.

How does it work?

Once you're four months away from State Pension age, you can either claim your State Pension or not. If you decide to defer, you simply do nothing. Your pension will automatically be deferred until you claim it.

Unless, that is, you are on benefits. Deferring can affect how much you can get in benefits, so you must tell the Pension Service if you're on benefits and you want to defer.

Benefits affected by deferring - and receiving higher payments as a result - include: Income Support, Pension Credit, Housing Benefit and Council Tax Reduction.

Either way, if you do decide to defer, you can receive your extra money in the form of higher regular payments or, if you defer for at least one year, as a one-off lump sum that includes interest set at 2% above the bank of England base rate.

You can claim a deferred State Pension at any time either online or by calling 0800 731 7898.

Once you receive it, the extra amount will be taxed in the same way as the rest of your state pension.

Should I defer my pension?

If you have retirement income from, for example, a workplace pension scheme, deferring your state pension might be a good deal - you could treat it like a really good savings account.

However, deferring your state pension for a year nowadays only really pays off 17 years later. You're giving up thousands of pounds in income each year, so it will take some time for that to build back up again.

But you could win long term - it all depends how long you live.

Ian Price at St James's Place Wealth Management said: "For someone who has sufficient income or savings to live off in the meantime, delaying the State Pension can be an attractive option.

"However, retirees looking to defer their State Pension should always seek appropriate advice as deferring could affect other areas of financial planning and some other welfare benefits."

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