Pensions - Articles - Appetite for State Pension deferral has waned

 Commenting on the figures, Stephen Lowe, group communications director at Just Group, said that it shows deferral on a downward trend – one in nine people were benefiting from deferring State Pension in 2004 but the figure is now one in every 12.

 Those reaching State Pension Age have been able to defer taking the cash in return for a higher pension since 1948 although the payback has fluctuated over the years. The number receiving such extra payments has been trending downwards since 2004 despite the Labour Government improving the returns that year.

 “The biggest recent change was alongside the introduction of the New State Pension in 2016 when the returns were made less generous,” he said. “Even so, in today’s low interest rate environment they remain relatively healthy, particularly as the extra income is uprated with Consumer Price Index inflation.

 “In general, deferral could work well for those in good health who are perhaps still working or who find that their State Pension income pushes them into a higher tax band than necessary.”

 Since April 6th 2016, those deferring can receive 1% more income for every nine weeks they defer, equal to a return of nearly 5.8% extra for every year deferred. For someone on full State Pension of £168.60 a week, that would boost their annual income by £500 for every year deferred.

 Those who reached State Pension Age before April 6th 2016 can still opt to defer with the return set at 1% more State Pension income for every 5 five weeks deferred, or 10.4% a year, which can be taken either as extra income or a lump sum.

 “Since the pension ‘freedom and choice’ reforms, people have more flexibility when taking pension money but also more responsibility to make good pension choices and to consider options such as State Pension deferral,” he said. “A good starting point is the free, independent and impartial guidance offered by the Money and Pensions Service.

 “Given that deferral offers returns that are guaranteed and protected from inflation, it is one of those important options that all those reaching State Pension Age should at least consider.”
 
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