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State Pension Deferral - Delay Receiving State Pension for Cash Lump Sum and Extra State Pension State pension deferral is an option to delay claiming state pension when you reach state pension age in the UK. When you choose to delay claiming your state pension when you are entitled to do so, you could either get a higher retirement income when you decide to claim it or you could choose to claim a taxable cash lump sum. Your choices when you reach State Pension age
Even if you are not working when you reach State Pension age, you are allowed to delay claiming your State Pension. If you opt for State Pension deferment, you must choose to delay receiving state pension for at least 5 weeks. For each 5 weeks delay in claiming State Pension you get an extra 1% on your State Pension entitlement and this equates to 10.4% increase in your pension for each year of your State Pension deferral.
Taxable cash lump sun payment If you want a cash lump sum payment, you must delay receiving State Pension for at least a year. The amount of cash lump sum you receive will be based on the State Pension you have sacrificed plus interest. (The interest will be at least 2% above the Bank of England base rate.) The cash lump sum you receive is taxable. When you receive the cash lump sum payment, you will also receive normal State Pension. Table Showing Cash Lump Sum and Extra Pension
The Pension Service will normally contact you 4 months before you reach State Pension age to find out whether you want to start claiming your State Pension or opt for State Pension deferral. They will send you a claim form and booklet, BR33,which gives you general information about State Pensions and how to claim.
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