What is a deferred pension?
Deferred pensions are pensions which are not taken up immediately.
This can be for a variety of reasons. A person switching jobs might well find that it is in their best interest to freeze their current occupational / company pension, rather than take it with them through a pensions transfer. In that case, the pension is known as a deferred pension, as it will not be taken up until later, or until the point of retirement.
In such situations, it is strongly advisable to consult a pensions adviser qualifed to perform the highly complex task of a transfer value analysis. This analysis will compare the advantages of a deferred pension versus a pensions transfer, in your individual situation.
Speak to one of our friendly advisers about deferring your pension on 0800 678 5929 or request pension advice online
Deferred Basic State Pension
People at the end of their full-time working life may also opt for a deferred pension, for a number of reasons. Perhaps you have agreed with your employer to work longer than the state pension age. In this case you may choose to defer your Basic State Pension by one or more years.
By doing this you gain extra pensions benefit, the logic being that a later take-up of the State Pension means that the pension is going to pay out for a shorter period. These additional State Pensions benefits due from deferred pensions can result in higher State Pension payments on an ongoing basis, compared to what you would have received.
People who put off claiming their State Pension, for example, will increase their pension payments by 1% for each five weeks they defer. This is equivalent to 10.4% for each complete year.
Those who take their state benefits as a deferred pension, putting off uptake by at least 12 consecutive months, are offered the option of taking the additional benefits as a one-off taxable lump sum, and then have their State Pension paid as well, at the normal rate.
Taking the deferred pensions option can be attractive to higher rate taxpayers working beyond the state retirement age, for whom taking the State Pension might use up their personal allowance in the current year.
If you are unsure of the best course of action for you, our pension advisers can help, with unbiased, confidential advice.
Submit a pension enquiry or call us on 0800 678 5929
