Deferring The State Pension FAQ

If you are unsure about whether to delay taking your state pension, here are some answers to the most frequently asked questions.

As is often the case with financial matters, deciding not to take the money depends on several factors, like age, health and other income.

Many people who have cash in the bank, a pension or other investments are thinking about deferring their state pension, as are those who may decide to keep on working and simply don’t need the money for another year or two.

What happens if I don’t take my state pension?

The big attraction is anyone who does not take their state pension picks up a 1% increase for every five weeks deferred – which is a massive 10.4% for a year and at least a 300% better return on the money than paid by any bank or building society.

This rate last until April 5, 2016, when it will be cut to 5.8%.

What’s that worth in cash?

Well, not taking the cash for a year will see your state pension leap from £113 a week to £124

How will this affect the flat rate pension?

If you can take your pension this year, it will not make any difference because only those who have their 65th birthday after April 6, 2016 are entitled to draw the flat rate pension anyway

What do I have to consider to defer my state pension?

You obviously need other income to live off. If cash in the bank or your personal pension is paying less than 10.4% a year, then think about drawing out the cash you need and leaving your state pension undrawn.

Also think about the income you will lose – around £5,800 over the 12 months. If you can afford to do without that money, then earning that extra cash is obviously worthwhile in the long run.

However, £5,800 divided by the £612 you gain each year means you need to live at least 10 years to make up on the lost income.

What if I have other income?

Run the numbers. You need to know how much you might lose in yields from other investments plus the tax and any charges you might have to pay on liquidating them to pay your living costs

Where can I get free advice?

The new government Pension Wise service will be able to help with your decision

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