What are my choices at State Pension age?
When you reach State Pension age you don't have to claim your State Pension straight away. You may not need the income from your State Pension immediately because, for example, you intend to carry on working. You can:
- claim State Pension while you carry on working (your earnings will not affect the amount of State Pension you get but, as State Pension counts as income for tax purposes, claiming State Pension may affect the amount of tax you have to pay)
- retire from work and claim your State Pension or
- put off claiming State Pension for a while to get either extra State Pension or a one-off taxable lump-sum payment when you do claim, whether you carry on working or not.
If you decide to put off claiming State Pension, your options when you finally claim will depend on how long you put it off for.
To get extra State Pension you have to put off claiming for at least five weeks.
- You build up extra State Pension at 1% of your normal weekly State Pension rate for every five weeks you put off claiming (this is equivalent to about 10.4% extra for every full year you put off claiming). The amount of extra State Pension you receive when you claim it is calculated by adding up all the extra State Pension accrued. It is not compounded and should not be seen as interest.
- Extra State Pension is paid on top of your normal weekly State Pension from when you start claiming it, and continues for as long as you are getting State Pension. Extra State Pension is increased each April in line with increases to your State Pension.
Example – extra State Pension
Anne decides to put off claiming her weekly State Pension of £90. When she finally claims her State Pension after two years, she chooses extra State Pension. This will give her a total weekly State Pension of £108.72 for life. (In this illustrative example, the extra State Pension of £18.72 is based on £90 per week State Pension for the whole period. In a real example, the amount will be more if the State Pension rate goes up during this time).
To get a lump-sum payment you have to put off claiming for a continuous period of at least 12 months (which cannot include any period before 6 April 2005).
- The lump sum is a one-off, taxable payment based on the amount of normal weekly State Pension you would have received, plus interest. You also get your State Pension paid at the normal rate from when you start claiming it.
- The interest rate will always be 2% above the Bank Rate set by the Bank of England (so if the base rate was 4.5%, the rate of interest would be 6.5%). As the Bank Rate set by the Bank of England may change from time to time, the rate of interest used to calculate the lump sum can also change.
Example – lump sum
Ahmed decides to put off claiming his weekly State Pension of £105 for three years. When he finally claims his State Pension, if he chooses a lump sum, he will get a lump sum of around £18,000 (before tax) as well as his normal weekly State Pension entitlement. (In this illustrative example, the lump sum is based on £105 State Pension and interest of 6.5% for the whole period. In a real example, the amount will take account of changes in both the weekly State Pension and the interest rate.)
Find more examples in Your guide to State Pension Deferral (SPD1)
You can find out how much you could get by putting off claiming your own State Pension by phoning the Pension Forecasting Team on 0845 3000 168 (If you have speech or hearing difficulties you can contact us using a textphone on 0845 3000 169).
If you're already over State Pension age and you want to find out how much you can get if you stop claiming your State Pension for a while (or if you haven't yet claimed it) phone The Pension Service on 0845 60 60 265 (If you have speech or hearing difficulties you can contact us using a textphone on 0845 60 60 285).
How long can I put off claiming State Pension?
There's no maximum time limit on how long you can put off claiming your
State Pension to earn extra State Pension or a lump-sum payment.