You can increase your state pension by not drawing it as soon as you are eligible
It can take a long time to recoup what you deferred
You can increase the amount of state pension you get by not drawing it as soon as you are eligible. And if you already receive the state pension you can suspend the payments and receive an uplift when they restart, though can only do this once.
If you delay or suspend taking the new state pension, for every nine weeks it is delayed the pension increases by 1 per cent, and after one year's delay it increases by 5.8 per cent. This is in addition to annual triple lock increases.
If you reached state pension age before April 2016, and delay or suspend taking it you get an uplift equivalent to 1 per cent for every five weeks or 10.4 per cent for a year. You can also take the extra amount as a lump sum rather than an increased income – which is not possible with the new state pension.
If you’re well-off and have other sources of income, when you start receiving your state pension there are likely to be tax implications for your other sources of income because the state pension uses up most of your £12,570 personal allowance for income tax. “It may make sense to defer state pension if you continue to have a high income when over state retirement age,” says chartered financial planner Kay Ingram.
However, also consider if you would recoup what you are not immediately taking. If you delay the new state pension by a year it takes about 17 years of extra income to make up what you missed out on. And it takes nine years and eight months to recoup the basic state pension – though you can also get this as a lump sum. If you die before these 'break even' periods you could lose out financially.
"The surviving spouse or civil partner of a basic state pension recipient may inherit some of the extra pension, but those in receipt of the new state pension don't benefit in this way," adds Ingram.
Also see Should I delay taking my state pension? (IC, 19.11.21)
