You have the option to postpone receiving your state pension in order to increase the total amount you will receive when you do eventually start collecting it. Determine how much you will receive and consider whether or not the offer is advantageous.

Can I postpone receiving my state pension?

You cannot begin drawing your state pension before you reach the age at which you are eligible to begin drawing it; however, you can delay the date on which you begin receiving it.

It is possible that doing so will result in an increase in the amount of your weekly state pension or possibly a one-time payout.

You are free to put off collecting your pension for as long as you like, but you are required to do so for the entire amount, which includes your basic state pension as well as any additional state pension you have accrued.

In order to make additional money from your pension, you can begin delaying its payment at any time, even if you have already begun drawing from it.

This tutorial will explain how it operates as well as whether or not you will actually be better off as a result of using it.

Postponing your state pension while simultaneously collecting an additional pension

If you wish to try to increase the amount of your state pension you receive by delaying when you start receiving it, you will need to postpone receiving it for at least five weeks before you may do so.

When you became eligible for the state pension determines how much money you would receive as a return on your investment.

If you attained the age for the state pension before April 6, 2016, you are eligible.

You will receive a one percent boost in your pension for every five weeks that you wait receiving it. This equates to a total annual increase of 10.4 percent over time.

In the fiscal year 2022–203, the standard state pension will be calculated at £141.85 per week, or £7,376.20 per annum.

Your yearly state pension will grow to £156.60 per week, which is equivalent to £8,142.20 per year, if you choose to delay receiving it for one year.

If you achieved the age for the state pension after April 6, 2016, you are eligible.

The rate of annual rise will drop from 10.4 percent to 5.8 percent beginning in April 2016 for individuals who become eligible for the state pension after that date. This will make the offer less appealing.

This is due, in part, to the newly implemented state pension, which is more generous than the previous state pension.

In 2022-23, the new state pension will be £185.15 per week, or £9,627.80 per year.

Your yearly state pension will grow to £195.89 per week, or £10,186.28 per year, if you choose to delay receiving it for an additional year.

Taking a lump payment instead of your state pension so that you can delay receiving it

You have the option to delay accepting your state pension and get it as a lump sum instead; but, in order to qualify for the lump sum payment, you will need to delay taking your pension for at least one year.

It is important to note that anyone who became eligible for the state pension on or after April 6, 2016, is not eligible to choose this option.

Using a calculation of compound interest, it is as if you had deposited the postponed pension into a savings account where it earned 2 percent more than the base rate that the Bank of England was offering at the time, which is presently 0.10 percent.

However, the DWP calculates interest on a weekly basis rather than on an annual basis; at the moment, this comes out to 0.04 percent every week.

Do I have to pay taxes on my state pension that has been delayed?

If you choose to take an additional pension, you will only be subject to income tax on the aggregate amount of money you make from all of your pensions combined if you do so.

If you choose to take the deferred pension as a lump payment, it will be subject to taxation at the same rate that you are now paying; receiving the lump sum will not cause you to be subject to a higher tax rate.

For instance, if you are a taxpayer at the basic rate of twenty percent at the time you come to withdraw the lump sum from the state pension, you will be taxed as a taxpayer at the basic rate, even if the lump sum you get pushes you into a higher tax bracket than you were previously in.

When it comes time for you to claim your lump sum payment, the Department of Work and Pensions will give you a declaration form. On this form, you will be required to indicate the tax rate that you are now subject to.

At the conclusion of the tax year, HMRC will review this, and if they determine that you have been overtaxed, you will be eligible for a refund. But you’ll have to make up the shortfall in tax payments if you haven’t paid quite enough already.

Should I put off collecting my state pension until later?

If you have retirement income coming from other sources, such as a company pension, deferring your state pension might be a good deal for you – you could treat it like a really good savings account. This is especially true if you have retirement income coming from other places, such as a government pension.

If you’ve retired to a nation, like Australia, where the state pension you receive isn’t affected by annual rises in the UK, deferring your pension may be an option to consider.

However, you will lose more than £7,000 in income each year by delaying retirement, and it will take you a number of years of collecting the state pension before you can make up for the money that you will lose by doing so.

If you achieved the state pension age prior to April 6, 2016, delaying your state pension for one more year won’t really pay off until approximately nine or ten years after you make the decision to start taking your pension.

If you attained the age for receiving a state pension on or after April 6, 2016, the “pay back” period is 17 years.

Consider the fact that you could wind up with a lot more money when you become older if you keep your body in good shape; this is especially true if you exercise often.

How much more money would I be able to collect if I delayed receiving my state pension?

Our table (which can be found below) examines the net loss or gain that will be used to decide whether or not delaying would be worthwhile over a variety of time frames.

If you choose to defer getting the state pension, five years after you began receiving it under both systems, you would still be in a significant deficit. This is because the state pension is indexed to inflation.

Under the new method, you would not have made up what you had lost after 10 years, whereas under the old system, your deferral would have started to pay off once that amount of time had passed.

For instance, according to the previous guidelines for the state pension, postponing retirement for three years would net you a profit of about £3,000 after 10 years, but you would still be looking at a deficit of £10,000 as a new state pensioner.

If I defer my state pension, will I lose any benefits as a result?

It is important to note that claiming additional state pension will have an impact on any other benefits, including pension credit, house benefit, and council-tax reduction.

This is due to the fact that the additional sum you get is considered income. On the other hand, if you choose to collect your benefits in a lump sum, they won’t be modified in any way.

When you postpone your state pension, you won’t accrue any additional pension or lump payment for the days that you receive any of the following benefits, including but not limited to the following:

income support pension credit
employment support allowance
jobseeker’s allowance
remuneration for caregivers
allowance for severe disability in addition to incapacity benefit
a pension for widows
the allowance for widowed mothers
any kind of public pension whatsoever

Should I take the increased income, or should I take the money all at once?

Everything hinges on your personal situation, how you want to spend the money, and, of course, the age at which you become eligible to receive a state pension.

Those who reached the age for the state pension before April 6, 2016, have the opportunity to receive an extra pension, which currently provides the best deal available. The interest rate being offered by the extra pension is 10.4 percent per year, which is significantly higher than the interest rate you could earn on a savings account.

However, if you are currently receiving any of the benefits listed above, you should consider this decision very carefully before accepting the additional income in case it has an impact on those benefits.

Putting off receiving your state pension is no longer an incredible value for individuals who achieved the age requirement for receiving it after April 6, 2016.

There is a possibility that you will not live long enough to earn back the additional pension that you deferred for due to the length of time – 17 years – that it will take to get what you have lost back.