Pension deferral: When should you consider delaying taking your pension? Expert advice

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Although not the right decision for all, people should consider all options as deferring could potentially offer big rewards for some.

Research from AJ Bell has shown if people live past the age of 90, they could receive over £7,000 more throughout their retirement by deferring their state pension for only a year.

Ian Neale, Co-Founder of Aries Insight, said that the decision requires a number of factors to be considered.

“People often underestimate their own longevity and think they’ll die sooner than they do generally.”

He said people aged 65 today are likely to live into their late 80s and so need to provide for themselves for roughly two more decades.

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The average inheritance tax bill has climbed over £200,000 (Image: Getty)

He said that many people don’t have big enough pension funds to provide an adequate income for themselves in retirement.

For example, he says, a pension pot of around £100,000 is about average. However, if this is translated into an annuity it will provide only about £4,000 a year if the individual is lucky.

This won’t provide anyone with a comfortable living so in circumstances like this it can be worth looking to other options to increase retirement income.

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Especially if someone has been used to enjoying an income of upwards of £30,000 a year, going from this to a lower retirement income is likely to be jarring.

This added to the fact that people are reluctant to stomach a significant drop in income in their retirement means it may be worth delaying taking the state pension to accrue greater income in the future, he continued.

Stephen Lowe, group communications director at retirement specialist Just Group, said the fall is to be expected given rising State Pension age and changes introduced with the New State Pension in April 2016 that reduced the returns for deferring.

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He said: “Deferring State Pension is still available and is something that should be considered alongside other retirement options.

“In some circumstances it can make sense to forego some income in the short term for a higher income in later life that is guaranteed to keep up with inflation.

With average life expectancy from age 66 at 19 years for a man and 21 years for a woman, according to the Office for National Statistics (ONS).

This makes the decision to delay one that some people living older may look back on as a wise choice, the expert claimed.

However, it is still worth being wary of deferring.

If someone is in great need of the money their state pension can give them, then the best course may be to claim it, the experts suggested.

The experts added this is because extra income from a deferred pension may lead to benefits being taken away, leading to no benefit at all.

Harry Byrne

Harry Byrne

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