The State Pension
Putting off your State Pension
When you reach your State Pension age (SPA), you do not have to claim your State Pension straight away. You can put off claiming the benefit.
Putting off drawing your State Pension
When you reach your State Pension age (SPA), you do not have to claim your State Pension straight away. You can put off claiming the benefit. In return, when you do decide to take your State Pension, if you've put off claiming it for at least 9 weeks, you may get extra money. Different terms apply depending on when you reach your SPA.
Reached your SPA before 6 April 2016
Usually you don't have to do anything to put off claiming your State Pension. If you don't claim it, it won't be paid to you. This is unless you are receiving certain benefits before you reach State Pension age. In this case you will need to tell the Pension Service that you want to 'defer' it. (In Northern Ireland, this would be the NI Pension Centre.)
When you decide you want your State Pension to begin, you need to submit a BR1 claim form to the Pension Service.
If you put off claiming your State Pension for at least 5 weeks, under the rules that apply to these circumstances, your extra State Pension accrues at 1/5th of 1% for each week (equivalent to 10.4% for a whole year) and is taxable income.
Category B Pension
A Category B pension (sometimes referred in the past as the married person's pension) is paid based on your spouse's or civil partner's qualifying years and earnings. The amount works out as roughly 60% of your partner's basic State Pension (there is a small bit of rounding) and is paid once both partners have reached state pension age. You can put off your Category B pension and you can make this decision can be made independently of any decision your partner makes.
State pension already in payment
You can still decide to give up your pension for a period. However, you can only give up your State Pension once and you should normally be living in the UK. You can only do this to earn an extra State Pension (or, under current law, lump sum) if you're 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.
Claiming the extra money as a lump sum
Currently the law states that if you put off claiming your State Pension for at least 12 months in a row, you may choose to take a lump sum payment instead of extra pension. This will include interest of 2% above Bank of England base rate. The lump sum is taxable at the same rate as your other income.
What counts towards your extra State Pension
In general, all the weeks you put off claiming your State Pension will count towards your extra State Pension, but there are exceptions. These are generally connected to time when you are also receiving other State Benefits.
To find out more about deferring your State pension, please click here.
Reaching your SPA on or after 6 April 2016
It will still be possible to put off claiming your State Pension under the new rules which came in on 6 April 2016 although there will be a few differences.
If you reach State Pension age under the new system you will no longer be able to receive your deferred State Pension as a lump-sum payment. Instead, you can continue to accrue an extra weekly state pension by deferring claiming your State Pension. Under the new system the rate of accural is set at 1/9th of 1% for each week (this is just under 5.8% for a full year - rather than 1/5th of 1% for each week under the previous system) that you put off claiming it. The new State Pension and any extra State Pension are both taxable income.
If your pension is already deferred on 6 April 2016, you will continue to be treated under the old rules - i.e. you will still be entitled to take a lump sum or increased pension.
Where can I find out more?
If you need more information, please contact us. A pension specialist from our team will be happy to help with whatever pensions-related question you have. Our help is always free.