Thousands of Brits warned state pension ‘mistake’ could cost them £12k a year | Personal Finance | Finance

Brits have been issued a warning about deferring their State Pension that could see them miss out on thousands of pounds, as an expert urged pensioners to « think carefully ». Hundreds of thousands of people become eligible for the taxable benefit from the Government each year, though a significant number choose to delay receiving it. When you defer your State Pension, you opt not to claim it immediately after reaching state pension age, which is currently 66. Depending on your circumstances, there may be financial benefits to doing so.

Under the current system, the State Pension rises by 1% for every nine weeks you defer (this amounts to 5.8% annually). For those who reached State Pension age before April 6, 2016, before the new State Pension was introduced, the benefits were even greater. People in this cohort were able to claim a 10.4% annual increase for every year they pushed it back.

Advantages to not claiming straight away include receiving higher amounts if you claim State Pension income later, and reducing the amount of taxable income you’re subject to while still part of the workforce. This may make doing so attractive to those paying the higher tax rate.

But it comes with a catch, as maximising the financial benefits of deferring will depend on how long you live post-66. While you may initially benefit from the annual 5.8% uplift, it may take years to make up for the shortfall of skipping even one year.

For example, if you chose to defer for one year from January 2026, research from Royal London showed you’d get around £243.60 a week next year. This amounts to an additional £694.72 per year (not including boosts related to the triple-lock).

However, deferrers entitled to the new State Pension will have missed out on nearly £12,000 of State Pension by forgoing the weekly payments in that time.

A basic rate taxpayer who delays receiving it for one year would have to live until around 82 to make up the difference. The period would be shorter for those with taxable earnings over £50,270, who would need to live to 79.

It comes as new data shows the number of people choosing to delay has declined in the most recent complete published tax year. Figures obtained by Royal London via a Freedom of Information (FOI) request showed 41,938 people claimed a previously deferred State Pension in 2023/24 and received higher weekly payments as a result.

But it marked a 22% decline from the previous year, when 54,037 deferred pension claims were recorded. Some of those claiming their State Pension for the first time in 2023/24 had delayed it for more than 30 years.

People in this group, known as « super-postponers », would have become eligible for their State Pension during 1991/92 at a time when the qualifying age for men and women was 65 and 60, respectively. Most of them would be in their 90s, with some potentially over 100.

Sarah Pennells, consumer finance specialist at Royal London, said: “With the State Pension age now at 66 and due to start rising to 67 from April, many people are only too keen to claim their State Pension.

« However, our figures show that some people, for whatever reason, are delaying getting their State Pension payments. The numbers deferring in 2023/24 have fallen quite dramatically from the previous year, which could be because fewer pensioners are able to manage without the State Pension.

“However, with the new State Pension expected to rise to just below the personal allowance from April, we could see an increase in the number of people with other forms of income deferring, as they look to reduce the income tax they pay.

“If you’re thinking of delaying claiming your State Pension, then it’s a good idea to assess whether it is right for you. Getting the extra money may look attractive, but you are giving up the right to receive any State Pension payments until you stop deferring, and it could take years to see the benefit. The less tax you pay, the less worthwhile delaying might be.”

“If someone defers their pension and then dies, their surviving spouse or civil partner will only receive the extra pension if the person who deferred reached State Pension age before April 6, 2016. These figures highlight why it’s so important to think carefully before making this decision.”