My 66th birthday is in August. I am currently still working, although on a part-time basis, but my income from that is sufficient to meet my needs for the meantime.

However, I am due to get the state pension in a few months’ time, but don’t really need the money. Do I have to take it? Could I delay it? 

Emma

Rachel Vahey,  AJ Bell Head of Public Policy, says:

The state pension age for UK adults is now age 66 for both men and women, however this is due to gradually rise to age 67 between 2026 and 2028 and then age 68 between 2044 and 2046 although there is an ongoing debate over whether to bring these dates forward.

Anyone who has at least 10 qualifying years on their National Insurance record can receive a state pension, but to receive the full state pension they must have 35 years of National Insurance qualifying years.

A qualifying year is one where a person was working and made National Insurance contributions or they received National Insurance credits instead, for example if they were unemployed, ill, or a parent or carer.

People can also make up ‘missing’ qualifying years by paying voluntary National Insurance contributions, which might be worth considering if they haven’t got the full 35-year record.

Someone can carry on working and still claim their state pension without having to retire, and they will no longer have to pay National Insurance contributions after their state pension age.

However, the state pension is taxable so adding it to any other earned income could push some people into a higher tax bracket and could affect their entitlement to certain benefits such as pension credit, housing benefit or council tax reduction.

People don’t have to take the state pension, they can choose to defer it and receive a bigger state pension when they do claim it.

Their state pension will increase by 1% for every nine weeks they defer it, which works out at just under 5.8% for every year.

For example, if someone entitled to the state pension of £11,502 deferred it for a year, they would get an extra £667 a year pushing it up to a total of £12,169, assuming there is no annual increase in the state pension in the meantime (if there is, the amount could be larger).

They then would receive that larger amount (plus any increases) for the rest of their life, but it does mean forgoing their first year of state pension.

It would take roughly 17 years to break even – to get back the value of that first payment they gave up through a higher state pension afterwards.

An alternative would be to claim the state pension of around £11,500 but save or invest it, for example in an ISA (individual savings account) if they have the available allowance, then they would have ready access to it.

Whether or not state pension deferral is the right option will depend on each person’s personal circumstances. For some it simply won’t be possible as they need the state pension income as soon as possible, while for others it might depend on their health and lifestyle.

Very broadly, if someone is in poor health then it may be better to take the state pension, but if they are in good health and think they may live beyond 17 years, then it could be worth considering.

Finally, people can only receive their state pension if they claim it. The Department for Work and Pensions (DWP) writes to people about two months before state pension age, so anyone deciding to defer it can either do nothing or ask the DWP to defer it. 

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