When you reach your State Pension Age (SPA), you
do not have to claim your State Pension straight away.
You can defer claiming the benefit. In
return (although
there are some exceptions which are described below), when you
do decide to draw your State Pension, as long as you have put off
claiming for at least 5 weeks, you will receive an extra State
Pension at a rate higher than would have applied at your SPA.
Alternatively, if you have given up your State Pension continuously
for at least 12 months, you can choose to receive a lump sum.
You need not take action to defer your State
Pension. By not making a claim, your State Pension will
automatically be deferred. When you want your State Pension
to begin, you need to submit a BR1 claim form to the Pension
Service. Click
here for information about claiming your State Pension.
Extra Pension
By deferring your State Pension, your income is increased at a
rate of 1% for every 5 weeks you put off drawing it. This equates
to 10.4% extra for a complete year of deferment.
For example let us suppose that an individual decided to defer
their State Pension in 2008 when their total State Pension was
£110 a week for a total of 2 years. Also let us suppose that
during these 2 years the April increases in State Pension amounts
meant that their total State Pension had risen to £120 a
week. Then on claiming after 2 years this individual would receive
their regular pension of £120 a week plus an Extra State
Pension amount of £24.96 per week (i.e. 20.8% of £120).
This gives a total state pension, after 2 years of deferment, of
£144.96 per week.
Lump Sum
You also have the choice of a lump sum, as long as you delay
drawing your pension for 12 consecutive months. The lump sum will
equal the amount of pension you would have received plus interest.
The rate of interest used equates to 2% above the Bank of England
base rate.
As an example if you were to deferring a pension
of £105 a week for 5 years, ignoring inflation
increases, the lump sum available would be about £32,000
(before tax). This assumes the base rate was 4.5% (and
therefore the rate applying was 6.5%) for the entire 5 years.
The state pension would then be paid at its normal rate, including
any inflation increases over the 5 years.
The lump sum is taxable at the same rate as your other
income.
Category B Pension
A Category B pension (sometimes referred in the past as the
married person's pension) is paid by virtue of a spouse's or civil
partner's qualifying years and earnings. The amount works out as
roughly 60% of your partner's Basic State Pension award (there is a
small bit of rounding) and is paid once both partner's have reached
state pension age.
It is now possible to defer your Category B pension and this
decision can now be made independently of any decision your partner
makes. Prior to the 6th of April 2010 however it was not
possible to defer your Category B pension unless your spouse also
deferred their state pension.
State Pension Already In Payment
You can still take advantage of the deferral options by electing
to give up your pension for a period. However, you can only give up
your State Pension once and you should normally be resident in the
UK. If you are not resident in the UK, you would normally only be
permitted to give up your State Pension to earn an extra state
pension or lump sum, if you are living in one of the following
countries:
Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia,
Finland, France, Germany, Gibraltar, Greece, Hungary, Iceland,
Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta,
Netherlands, Northern Ireland, Norway, Poland, Portugal, Republic
of Ireland, Slovakia, Slovenia, Spain, Sweden and
Switzerland.
Exceptions
In general, all the weeks you put off claiming your State
Pension will count towards your extra State Pension or a lump-sum
payment, but there are exceptions.
You will not build up extra State Pension or a lump-sum payment
while you are putting off claiming State Pension for the following
reasons.
Q & A's
This means that you do not have to take your pension at State
Pension Age, instead you can put off receiving it to a later date,
this is called State Pension deferral.
You can still take advantage of the deferral options by electing
to give up your pension for a period. To do so, you should contact
your local Pension Centre. However, you can only give up your state
pension once and should normally be resident in Great Britain. If
you are not resident in Great Britain, you would normally only be
permitted to give up your state pension to earn an extra state
pension or lump sum, if you are living in one of the following
countries:
Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia,
Finland, France, Germany, Gibraltar, Greece, Hungary, Iceland,
Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta,
Netherlands, Northern Ireland, Norway, Poland, Portugal, Republic
of Ireland, Slovakia, Slovenia, Spain, Sweden and Switzerland.
From 6 April 2011, if you are in receipt of Pension Credit and
you (or your partner) have also deferred your state
pension, you will not qualify for deferment increases on your
state pension.
There is no limit. You can put off drawing your state pension
for as long as you like.
You will need to decide which option best suits your
circumstances. To help you decide, you'll need to take account of
the main differences: -
If you opt for an extra state pension, it is payable for the
rest of your life. If you elect to take the lump sum, it is a
one-off payment based on the amount of state pension you would have
got, if you had been claiming it as well as interest. You will also
get your state pension at the normal rate when you claim it.
Any extra state pension you receive will be treated like any
other income for the purposes of calculating the Pension Credit.
However, if you choose a lump sum, it is ignored for Pension
Credit, Housing Benefit or Council Tax Benefit.
An extra state pension is subject to income tax in the normal
way. The lump sum is also subject to tax but you will not pay a
higher rate on the lump sum than you will pay on other income you
receive in the tax year the lump sum is paid.
Note also that the death benefit rules are different between the
two options and we have published two questions on this subject
below as there are so many possible circumstances that can
apply.
No. It will be taxed at the rate that applies to your other
income.
There are many possible scenarios that could apply depending on
your marital status, whether you had put in a claim for your
pension before death and also the period that you deferred for at
the date of death (less than 5 weeks/ more than 5 weeks but less
than 12 months/ more than 12 months). Note also that if your widow/
widower is under state pension age at the date of your death and
remarries before state pension age then they have no claim to
either an extra state pension or lump sum deferral amount. A list
of all the possibilities is too long to list here. However the
DWP's Pension Service publishes a guide which covers all the
possible scenarios between pages 36 and 58. This guide can be
viewed here:
State Pension Deferral Guide
This depends on the choice that you opted for and your marital
status.
Loosely if you had selected the extra state pension option then
your surviving wife/ husband/ civil partner will inherit some
of the pension earned by deferring. The amount depends on the
amounts of Basic State Pension, SERPs, Graduated Pension and State
Second Pension you earned as a result of deferral. You can read
more on pages 39/ 42/ and 45 here:
State Pension Deferral Guide
Note also that your surviving partner needs to have collected
their own pension before they can make such a claim. Also if your
surviving partner was under pension age and remarries before
reaching state pension age then they lose the right to a claim on
your extra pension amounts.
If instead you selected the lump sum payment option then the
amount paid will form part of your estate as normal.
Any increases for periods before April 2005 are still calculated
using the pre 6 April 2005 rates of increase (1% extra for every 7
weeks). The more generous rates applicable after 6 April 2005 apply
for any period of deferment from 6 April 2005. However, if you wish
to take the lump sum option, it is necessary to give up your state
pension for at least 12 months after 6 April 2005.
Yes. Payment of the Winter Fuel Payment is dependent on you
being 60 and living in the United Kingdom.
If you put off claiming your state pension continuously for at
least 12 months, you can choose either to get an extra state
pension or a lump sum.
Yes, as long as you do so within 3 months of making your
original choice. If you do change your mind, any extra state
pension or lump sum will need to be repaid. You can only change
your mind once.
No. You have to choose either an extra state pension or a lump
sum payment.
If you choose to backdate your pension, the length of time you
have put off drawing your state pension will reduce. Consequently,
any extra state pension or lump sum due will need to be reduced
accordingly. For example, if you put off drawing your state pension
for 16 months, but choose to backdate for 2 months, for the
purposes of calculating your extra state pension or lump sum, the
calculation will be based on 14 months.
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You should contact the Pension Service. They pay your State
Pension and will be able process your application. They can be
contacted on 0845 301 3011.
When you want your State Pension to begin again, you need to
submit a BR1 claim form to the Pension Service. Click here for
information about claiming your State Pension.
