Britons nearing retirement age have the potential to increase their pension by nearly £700 annually, a fact that many are unaware of. Research from the Department for Work and Pensions (DWP) indicates that a significant portion of individuals are oblivious to the option of deferring their State Pension, which could lead to higher retirement income. A study by retirement specialist Just Group revealed that 66% of individuals aged 40-65 were not informed about the possibility of delaying claiming the State Pension beyond the official retirement age.
Among the 34% who were aware of the deferral option, 33% were uncertain about the impact on their regular payments, while 8% believed they would receive the same or lower amount. Surprisingly, only 10% of adults aged 66-75 mentioned that they had postponed claiming the State Pension. The main reasons for deferring included not needing the pension immediately (49%), seeking a higher income later (48%), and wanting to claim after retirement (20%).
Individuals receiving the New State Pension can enjoy a one percent weekly increase for every nine weeks of deferral, translating to approximately 5.8% extra income per year for each full year deferred. For the 2025/26 financial year, delaying payments would result in an additional £13.35 per week, equating to £694.20 annually for life, adjusted for inflation.
Stephen Lowe, group communications director at Just Group, emphasized the importance of weighing the decision to defer the State Pension carefully, as it involves a trade-off between immediate payments and higher future income. The Triple Lock mechanism ensures a substantial increase in State Pension for millions of pensioners starting in April, with the ONS confirming a 3.8% CPI figure, resulting in a 4.8% rise in pensions based on earnings growth.
Under the Triple Lock system, State Pensions increase annually based on the highest figure among average earnings growth, CPI inflation rate, or 2.5%. State Pension elements, including deferred pensions, rise with the September CPI figure. A 4.8% increase would mean the full New State Pension recipients receive £241.30 per week, while maximum Basic State Pension beneficiaries get £184.90 per week.
The amount of State Pension received depends on National Insurance contributions, with approximately 35 years needed for the full New State Pension. Chancellor Rachel Reeves will confirm the annual uprating during the Autumn Budget on November 26. The Personal Allowance for tax remains at £12,570 until April 2028, ensuring those solely on the full New State Pension remain tax-exempt for the next two years.
Individuals with additional income may need to pay tax, calculated on the amount exceeding the personal allowance. Tax payments are made a year in arrears, so if the uplift in the upcoming financial year pushes income over the threshold, a tax bill from HMRC would be due in July 2026.