Kuni Lingston
As retirement approaches, many individuals start thinking about how to make the most of their State Pension. A recent survey by Just Group, a later-life financial specialist, revealed that 25% of adults aged 55-64 are unaware of a major opportunity: deferring their State Pension.
This decision could lead to a £694 annual increase in retirement income, depending on when you became eligible.
Let’s break down the latest updates for 2025/26, how the deferral system works, who qualifies, and what steps you can take to increase your future pension.
What Is State Pension Deferral?
Deferring the State Pension means choosing to delay your claim after reaching State Pension age, which is currently 66. From 2026 to 2028, the retirement age is gradually increasing to 67.
For every nine weeks you defer claiming the New State Pension, your weekly payment increases by 1%, which adds up to around 5.8% per year. Over time, this could significantly boost your retirement income.
How Much Can You Get in 2025/26?
The UK Government has confirmed updated State Pension payment rates for the 2025/26 financial year. Here’s how it breaks down:
State Pension Payment Rates – 2025/26
| Type | Weekly Payment | Four-Weekly Payment | Annual Amount |
|---|---|---|---|
| Full New State Pension | £230.25 | £921.00 | £11,973.00 |
| Full Basic State Pension | £176.45 | £705.80 | £9,175.00 |
| Annual Deferral Increase | £13.35 | — | £694.20 |
If you qualify for the New State Pension and defer it for one year, your payments would rise by £13.35 per week, adding up to £694.20 per year.
Who Qualifies for the £694 Increase?
You may be eligible for this increase if:
- You reached State Pension age after April 6, 2016
- You defer your claim for at least 9 weeks
- You are still working, or have other income and do not need the pension immediately
For those who reached State Pension age before April 6, 2016, the terms are more generous—a 10.4% increase per year deferred, and you can even take the increase as a lump sum.
Example:
If you receive the Basic State Pension of £176.45 per week and defer for 52 weeks:
- You’ll earn an extra £18.35/week
- That’s an additional £954.20 annually
Future Pension Increases Under Triple Lock
Thanks to the Triple Lock commitment, the State Pension continues to increase based on the highest of inflation, wage growth, or 2.5%. The Labour Government has pledged to maintain this system for the next five years.
Projected State Pension Increases:
| Year | Estimated Increase |
|---|---|
| 2025/26 | 4.1% |
| 2026/27 | 2.5% |
| 2027/28 | 2.5% |
| 2028/29 | 2.5% |
| 2029/30 | 2.5% |
This means deferring your pension today could yield even greater returns in the future as base amounts continue to grow.
Tax Implications
The Personal Allowance will remain frozen at £12,570 for 2025/26.
If your only income is the full New State Pension, you will not pay income tax.
However, if you receive additional income from employment, private pensions, or investments that exceed the Personal Allowance, you will owe income tax on the excess.
Note: Income tax on pensions is paid a year in arrears, so if you exceed the threshold in the 2025/26 financial year, your tax bill will arrive in July 2026.
Why Many People Miss Out
According to Just Group, many retirees are not aware of the option to defer. Among women, 26% were unaware, compared to 19% of men. Even 26% of people aged 75+ did not know deferral was available.
- Deferring can be a good option for those who don’t need income immediately,” says Stephen Lowe, group communications director at Just Group. “It’s unfortunate that many people aren’t aware of it.
While deferral is no longer as lucrative as it once was, especially post-2016, it still offers a guaranteed inflation-proof income increase—an advantage in a volatile economy.
If you’re approaching retirement in 2025 or 2026, it’s worth considering deferring your State Pension—especially if you have other income sources and don’t need the money right away.
With a potential £694+ boost per year, deferral could provide greater long-term security and guaranteed inflation protection.
However, this option isn’t suitable for everyone, so it’s important to assess your financial situation carefully and seek professional guidance when needed.
FAQs
Is deferring my State Pension a good idea?
Yes, if you don’t need the income immediately. It increases your weekly payment and provides inflation-protected income for life.
How long do I need to defer to get a £694 boost?
You’ll need to defer for one year under the New State Pension system to earn an extra £694 per year.
Can I take the deferred amount as a lump sum?
Only if you reached State Pension age before April 6, 2016. Post-2016 retirees cannot take a lump sum—only increased weekly payments.