It is quite often the case that we are working beyond our state pension age, either through choice or necessity. The full state pension is currently £164.35 per week or £8546 per year and becomes payable when you reach your state pension age. This is added to your income and taxed accordingly, so could potentially be liable to 20%, 40% or, even 45% tax. 
The question then arises should I defer taking my pension until I need it?
When you defer a pension, or more to the point, choose not to claim it, the rate at which it is paid increases by 1% for every 9 weeks it is deferred for. Any less than this and the rate is not increased. So, if you defer the pension for a year the rate would be enhanced by about 5.8%.
This sounds like a decent figure, but you must remember you have not taken your income for a year.
By deferring you are basically gambling that the extra amount you are getting each year will, over time, offset the years that you did not take the pension for. In addition, you are potentially losing out on any growth the funds could have made by them being invested over this period.
As the rate of increase on the pension is roughly 5.8% per year, if you deferred for a year, you would have to have a reasonable life expectancy of around 18 years to be able to recoup the missed income in the first 12 months. Given that the average life expectancy for a man currently aged 65 is 86, this would mean surviving towards the top end.
As much as this is hopeful, it is sadly not guaranteed.
One potential option would be to reinvest the income from the state pension into a separate pension plan and thereby receive tax relief on the premiums.
Whatever you think, it would be well worth sitting down with a professional adviser before making the decision as thousands of pounds could be lost if the wrong decision is made.
This information is provided strictly for general consideration only. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned about the content hereof and any such action or inaction. Professional advice is necessary for every case.
Kristina Bailey Dip FA CeMAP
Should I defer My State Pension?
It is quite often the case that we are working beyond our state pension age, either through choice or necessity. The full state pension is currently £164.35 per week or £8546 per year and becomes payable when you reach your state pension age. This is added to your income and taxed accordingly, so could potentially be liable to 20%, 40% or, even 45% tax.
The question then arises should I defer taking my pension until I need it?
When you defer a pension, or more to the point, choose not to claim it, the rate at which it is paid increases by 1% for every 9 weeks it is deferred for. Any less than this and the rate is not increased. So, if you defer the pension for a year the rate would be enhanced by about 5.8%.
This sounds like a decent figure, but you must remember you have not taken your income for a year.
By deferring you are basically gambling that the extra amount you are getting each year will, over time, offset the years that you did not take the pension for. In addition, you are potentially losing out on any growth the funds could have made by them being invested over this period.
As the rate of increase on the pension is roughly 5.8% per year, if you deferred for a year, you would have to have a reasonable life expectancy of around 18 years to be able to recoup the missed income in the first 12 months. Given that the average life expectancy for a man currently aged 65 is 86, this would mean surviving towards the top end.
As much as this is hopeful, it is sadly not guaranteed.
One potential option would be to reinvest the income from the state pension into a separate pension plan and thereby receive tax relief on the premiums.
Whatever you think, it would be well worth sitting down with a professional adviser before making the decision as thousands of pounds could be lost if the wrong decision is made.
This information is provided strictly for general consideration only. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned about the content hereof and any such action or inaction. Professional advice is necessary for every case.
Kristina Bailey Dip FA CeMAP