Later Life

Almost half of retirees unaware of State Pension deferral option

About one million people currently receiving extra money as a result of deferral.

Rozi Jones
|
11th May 2020
Pension clock money retirement
"Deferring State Pension is an important option for the rising number of over-65s in good health and who plan to carry on working."

Nearly half of retirees are unaware that deferring the State Pension is an option, according to new research by Just Group.

47% of 55 to 64-year-olds didn’t know that deferring the State Pension would deliver a higher weekly guaranteed, inflation-linked pension when starting to claim their pension benefits.

Just over one in 10 (12%) of those aged over 65 had deferred their State Pension with the figure higher among women (16%) than men (9%) and also more likely among those who are semi-retired (22%) than fully retired (11%).

Historically low returns on cash and bonds make the guaranteed return offered by deferring State Pension more attractive, particularly given the protection deferral offers against future inflation.

Appetite for State Pension deferral has waned in recent years with about one million people currently receiving extra money as a result of deferral, about 25% fewer than the peak number in 2004, according to Department of Work and Pensions figures.

For those who reach State Pension Age on or after 6th April 2016, every nine weeks of deferral boosts pension income by 1%, equivalent to just under 5.8% more income for every 52 weeks of deferral.

With the full New State Pension rising to £175.20 a week from April, deferring for one year would result in £10.12 a week – more than £526 a year – extra income which will increase each year by inflation as recorded by the Consumer Price Index.

Stephen Lowe, group communications director at Just Group, said: “Deferring State Pension is an important option for the rising number of over-65s in good health and who plan to carry on working.

“It needs to be factored into people’s financial planning in the run-up to retirement so it is worrying that such a high number of people aged 55-64 don’t know that there is a degree of flexibility around when and how they take their State Pension.

“Our research found that the most common period for people to defer was between one and two years, but more than half of people defer for longer. Among those who chose not to defer, 31% said it was because they wanted to stop working as soon as they could. A quarter (25%) said they would have had to defer for too long to make the weekly increase worthwhile with the same number saying they did not think deferral was a good idea because the rules might change and they would lose out.

“Ultimately State Pension deferral can be a useful tool to have in the financial planning kit bag and something that people heading towards retirement should know about."

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