Almost 1 million boost retirement income by deferring state pension


These figures were revealed in a survey of 8,555 people aged over 50 conducted by Saga Investments in February 2016.

For those who qualify for the state pension before April 2016, the perks of deferring their pension are very generous. People who choose to top up their weekly pension can increase it by 1% for every five weeks they defer, which equals 10.4% a year.

The study reveals the choices people have made, prior to the forthcoming introduction of a single-tier state pension in April.


Of those who have deferred their state pension, almost half have done so for up to two years. More than one in 10 deferrers (13%) have put off taking their weekly state pension for five years or more.

How was the extra money used?

More than half of the deferrers surveyed (52%) have used deferral to top up their weekly pension, gaining an average increase of £22 per week; one in 10 is currently enjoying a boost of £70 or more per week by deferring.

A further quarter (24%) chose to take the additional amount as a lump sum. This option will no longer be available when the new state pension is introduced.

Half of respondents (%) said they used the lump sum to top up their savings accounts. One in 10 (13%) used the money to make improvements to their home and 11% used it to pay off their debts.

However, only 9% of respondents used their lump sum to grow their money further by investing it in the stock market. One respondent used the lump sum to repaint their narrowboat, and another gave it to their daughter as a wedding gift.

Women were almost twice as likely as men to take advantage of deferral (13% versus 7%). This suggests that women have made the most of the option to defer while working past their lower state pension age.

Overall, people of pensionable age who continued to work were much more likely to use the deferral to boost their income once they stopped working. 34% of working pensioners deferred their state pension, compared with only 8% of fully retired people.


Reduced perks

However, those who qualify for the new single-tier state pension will see the perks of deferring reduced, because the new state pension will be higher than the current basic state pension.

Under the new rules, the weekly top-up option will increase the state pension by 1% for every nine weeks deferred, equal to 5.8% per year.

Saga Investments also surveyed people approaching retirement who qualify for the new single-tier state pension. Of those people, only 7% said they will consider deferring when they collect their state pension.

Worryingly, almost a quarter (23%) of those approaching retirement mistakenly believed they would get the same deal as those who have already deferred their state pension.

Gareth Shaw, head of consumer affairs at Saga Investment Services, says: "The state pension is the bedrock of financial planning in retirement, and for those that have been able to afford to hold off collecting their pay, deferral can generate a significant income boost."

He adds that the figures show it takes around nine years for someone to recoup a year of deferred state pension. Given that the average life expectancy of a 65 year old is now 84 for a man and 86 for a woman, deferring has been a good deal for most people.

"However, deferring under the new state pension is far less attractive - we found that it would take more than 17 years to earn back the money deferred," says Shaw.

"Therefore, people will need to think very carefully about whether delaying the state pension is the right thing to do. Deciding how to manage your state pension alongside your other retirement savings should form part of an informed discussion with a financial planner."

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Your Comments

Great article. I deferred my pension until my limited savings ran out.
When i applied for my State Pension it took four months, and four attempts by two seperate departments to sort it out.
No one had ever met a deferment before!
Makie sure that you have sufficient cash in hand to accept a delay by the State in paying out your old age pension.