Reader’s Question – Should I defer taking my Basic State Pension?

3 min Read Published: 02 Mar 2011

Reader's Question:

I will shortly be eligible for my basic state pension. Currently I enjoy a pension from previous employment and have a part-time job. Would it be any advantage to me to defer my State Pension, and if so for how long? Probably an impossible question I know, especially the way things have been of late....!

My response:

Interesting question.

I recently answered a similar question for another reader – see my article Reader’s Question - Deferring a state pension.

To reiterate, if you choose to defer a state pension in general (although there are some exceptions), when you eventually decide to start drawing it, as long as you have put off claiming for at least 5 weeks, you will receive either a higher State Pension (than you would have got if you hadn't deferred) or alternatively you can choose to receive a lump sum, assuming you have given up your State Pension continuously for at least 12 months.

In monetary terms deferring a Basic State Pension for a year, for example, will boost your eventual pension by 10.4%. If, however, you chose to receive a lump sum it will equate to the amount of pension you would have received plus interest.

As to whether you should do this very much depends on your personal circumstances. Some wealthier retirees have decided to defer their state pension to avoid ending up going over the high rate income tax threshold in the current tax year. They then chose to take the benefits at a time when their other earnings have reduced back below the threshold. Some individuals defer their state pension simply because they don't require their state pension at the point at which they become eligible to receive it.

But on the flip side some people prefer to take the benefits based on a 'bird in the hand' ethos given the governments love of meddling with welfare benefits especially in this age of austerity.

As for how long you should defer for then the again the answer is personal. For example, how long do you think you will live? When will you need to start relying on your Basic State Pension for support.

I hope that helps and gives you some food for thought.

Further information on the implications of deferring the Basic State Pension can be found on the Pension Advisory Website.

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