Deferring your State Pension could increase DWP payments in retirement.
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New data from the Department for Work and Pensions (DWP) indicates that many people are unaware of the option to defer claiming their State Pension which can lead to a higher income during retirement.
Analysis of the data by retirement specialist Just Group, found that two-thirds (66%) of those aged 40-65 said they were not aware of the option to delay taking the State Pension beyond the State Pension age. Of the 34 per cent who did know they could delay, a third (33%) were unsure what the impact of deferring would be on their regular payments and an additional 8 per cent either thought they would receive the same amount or less.
The data also reveals low levels of people deferring the State Pension with only 10 per cent of adults aged 66-75 saying that they had delayed claiming the contributory benefit.
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When asked why they deferred the State Pension, the most popular options were either because people did not need financially to claim it as soon as they reached the State Pension age (49%) or because they were attracted to the higher income later (48%). A fifth (20%) also wanted to wait until they had stopped working before they claimed the State Pension.
People who receive the New State Pension can benefit from a 1 per cent increase in their weekly State Pension for every nine weeks that payments are deferred, equivalent to around 5.8 per cent extra income for every full year deferred.
Those who defer their payments for the 2025/26 financial year would benefit from an extra £13.35 a week – which equates to an additional £694.20 of income every year for life (plus any inflation-linked increases).
Stephen Lowe, group communications director at the retirement specialist at Just Group, said: “Deferring your State Pension is effectively a trade-off between receiving your full State Pension payments today or an increased State Pension later. Delaying the State Pension may not work for everybody but it’s certainly an option worth knowing about and exploring in more detail for those people who don’t need the money immediately.
“The decision requires careful thought. It takes around 17 years to break even if you defer the State Pension for a year so health and life expectancy are key considerations when weighing up whether you could benefit.”
State Pension payments 2025/26
Full New State Pension
- Weekly payment: £230.25
- Four-weekly payment: £921
- Annual amount: £11,973
Full Basic State Pension
- Weekly payment: £176.45
- Four-weekly payment: £705.80
- Annual amount: £9,175
Future State Pension increases
The Labour Government has pledged to honour the Triple Lock or the next five years and the latest predictions show the following projected annual increases:
- 2025/26 – 4.1% (the forecast was 4%)
- 2026/27 – 2.5%
- 2027/28 – 2.5%
- 2028/29 – 2.5%
- 2029/30 – 2.5%
State Pension and tax
The Personal Allowance will remain frozen at £12,570 until April 2028.
The most important thing to remember is that someone only on the full New State Pension will not pay income tax for the next two years, but older people with additional income through employment, private or workplace pensions, might need to pay tax.
The amount of tax paid is only on the amount over the personal allowance, and not the entire amount.
Anyone with additional income on top of their State Pension may need to pay tax. This is paid a year in arrears, so if the 2025/26 financial year’s uplift takes you over the threshold, you will not receive a tax bill from HM Revenue and Customs (HMRC) until July 2026.