Many people are not aware that the option is open to them, according to the Department for Work and Pensions
Many people are unaware of this way to increase your State Pension payments(Image: Getty)
Brits approaching retirement could boost their pension by almost £700 a year. However, many people aren’t aware that this is possible.
Data from the Department for Work and Pensions (DWP) suggests that a significant number of people are unaware they can defer claiming their State Pension, which could result in a higher income during retirement. As reported by the Daily Record, retirement specialist Just Group analysed the data and found that two-thirds (66 per cent) of those aged 40-65 were not aware they could delay taking the State Pension beyond the State Pension age.
Of the 34 per cent who did know they could delay, a third (33 per cent) were unsure what the impact of deferring would be on their regular payments, while an additional eight per cent either thought they would receive the same amount or less. The data also showed low levels of people deferring the State Pension, with only 10 per cent of adults aged 66-75 saying they had delayed claiming the contributory benefit.
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(Image: Getty)
When asked why they deferred the State Pension, the most popular reasons were either because people did not need to claim it financially as soon as they reached the State Pension age (49 per cent), or because they were attracted to the higher income later (48 per cent). A fifth (20 per cent) 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 one 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 postpone their payments for the 2025/26 financial year would receive an extra £13.35 a week – equivalent to an additional £694.20 of income annually 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.”
Those who defer their payments for the 2025/26 financial year would benefit from an extra £13.35 a week(Image: Getty)State Pension annual uprating
Millions of pensioners are set for a substantial State Pension increase from April after the Office for National Statistics (ONS) recently confirmed the final component of the Triple Lock mechanism. The Consumer Price Index (CPI) figure for September stood at 3.8 per cent, meaning the New and Basic State Pensions will increase under the earnings growth measure of 4.8 per cent.
Under the Triple Lock system, both the New and Basic State Pensions increase annually in line with the highest of three figures: average annual earnings growth from May to July (4.8 per cent), the CPI inflation rate for the year to September (3.8 per cent), or 2.5 per cent.
Additional State Pension elements and deferred State Pensions rise each year with the September CPI figure. A 4.8 per cent increase would mean those on the full New State Pension would receive £241.30 per week, while those on the maximum Basic State Pension would get £184.90 per week.
It’s crucial to note that the amount of State Pension someone receives is dependent on their National Insurance contributions. To receive the full New State Pension, you need approximately 35 years’ worth, but this may vary if you were “contracted out”.
Chancellor Rachel Reeves will confirm the annual uprating at the Autumn Budget on 26 November. A 4.8 per cent uprating on the current State Pension would result in the following amounts being received.
Full New State PensionWeekly: £241.30 (up from £230.25)Four-weekly pay period: £965.20Annual amount: £12,547Full Basic State PensionWeekly: £184.90 (up from £176.45)Four-weekly pay period: £739.60Annual amount: £9,614
Regarding State Pension and tax, the Personal Allowance will remain frozen at £12,570 until April 2028. It’s important to know that people solely on the full New State Pension won’t be liable for income tax for the next two years. However, older people with extra income from employment or private or workplace pensions may need to pay tax.
The tax is only paid on the amount exceeding the personal allowance, not the entire sum. Those with additional income on top of their State Pension might have to pay tax. This is paid a year in arrears, so if the uplift for the 2025/26 financial year takes you over the threshold, you won’t receive a tax bill from HM Revenue and Customs (HMRC) until July 2026.