Benefits Of Deferring The State Pension

Pension experts, the government, and even the news media are all warning us that Britons will have to work longer and save more in order to retire in comfort. Unfortunately, the news that we are living in a different time than the ‘golden age’ of past generations who were able to retire on half or more of their final salary has not reached everyone. Around 1 in 6 Britons have no pension savings at all, and will need to depend on the state pension for income.

Many others are considering working anywhere from five to ten years longer than they had originally planned, or delaying drawing from their private pension to give it time to recover from market turmoil. However, one option that many people don’t consider, because it is ‘free’ money, is delaying the state pension.

10% more income

However, deferring the state pension for even just a year can give you 10% more state pension income. Each year builds on top of the last, which means deferring the state pension for five years could give your income a crucial 50% boost.

In addition, those who choose to delay taking their state pension can reap their rewards in the form of a one-time lump sum payment if they would prefer, though experts calculate that getting a higher weekly income is the better value over the long run.

The appeal of deferring the state pension is not just for those who depend on it to survive. You can defer taking state pension payments even if you have stopped working and have entered retirement, as long as you don’t need the income and can live off your personal pension savings.

Wealthy pensioners may also want to defer the state pension for tax reasons, as often the extra state income can push them into a higher tax band.

Health effects

For millions of Britons, working past the ‘ideal’ retirement age of 65 or 66 is a hash and unavoidable reality. However, the silver lining is that those who are working will be more easily able to get by without the state pension and can more easily defer it.

Working into retirement, or going back to work in retirement, can also have numerous physical and mental health benefits, though these are often met with cynicism by a generation of workers who understandably resent the current situation faced by retirees. Still, it is true that even just working part-time can boost income, decrease stress and anxiety over money problems, and provide older people with a mental and social outlet. For those who are able, working past the state pension age can keep the isolation and depression that plagues many pensioners at bay. 

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