When Should You Take Your State Pension?
One of the most important financial decisions you'll make as you approach retirement is when to claim your State Pension. While the default retirement age is currently 66 (rising to 67 by 2028), you have some flexibility in when you start drawing your pension—and that choice can significantly impact your lifetime income.
Understanding Your State Pension
The UK State Pension is a regular payment from the government that you can claim when you reach State Pension age. For the 2024/25 tax year, the full new State Pension is £221.20 per week (£11,502.40 per year).
To get the full amount, you'll usually need at least 35 qualifying years of National Insurance contributions or credits. You need at least 10 qualifying years to get anything at all.
Can You Defer Your State Pension?
Yes! You can delay (or "defer") taking your State Pension. For every 9 weeks you defer, your State Pension will increase by 1% when you do claim it. That works out to just under 5.8% for every full year you delay.
Example Calculation
If you defer for 2 years (104 weeks), your pension would increase by approximately 11.6%:
- Standard pension: £221.20/week
- After 2-year deferral: £246.86/week
- Annual increase: £1,335 extra per year
Key Factors to Consider
1. Life Expectancy
If you're in good health and expect to live well into your 80s or beyond, deferring may make sense. The extra income compounds over time.
2. Other Income Sources
If you're still working or have other income, you might not need your State Pension immediately. Deferring could be tax efficient.
3. Break Even Point
It typically takes 17 to 20 years to "break even" on a deferral. If you defer for 2 years, you'd need to live until around age 85 to come out ahead financially.
4. Inflation Protection
Your State Pension increases each year in line with the triple lock (the highest of earnings growth, price inflation, or 2.5%). Deferring gives you a higher baseline for these increases.
Should You Defer?
Consider deferring if:
- You're still working and earning well
- You're in excellent health with family longevity
- You have sufficient income from other sources
- You want to maximise your income in later years
Take it on time if:
- You need the income now
- You have health concerns
- You'd rather have guaranteed income sooner
- You're unsure about your longevity
Tax Implications
Remember that State Pension counts as taxable income. If you have other income sources, your State Pension could push you into a higher tax bracket. Deferring might help manage your tax liability across your retirement.
Getting Personalised Advice
Every situation is unique. Your decision should take into account:
- Your overall retirement income
- Your expected expenses
- Your health and family history
- Your spouse's pension situation
- Any private or workplace pensions
At Clearcastle, we help clients navigate these complex decisions with personalised pension planning that considers your complete financial picture.
Next Steps
- Check your State Pension forecast at gov.uk
- Review your National Insurance record
- Consider your other pension income
- Speak with a financial adviser about your specific situation
Need help planning your retirement income? Schedule a free consultation with our team to discuss your pension strategy.