Brits entitled to State Pension don't realise it - and they're missing out

A study of 1,050 retired and semi-retired individuals by later-life specialist Just Group revealed that a quarter (25%) of those aged 55-64 are unaware they can defer their State Pension. The official retirement age is currently 66 for both men and women, but it is set to increase to 67 between 2026 and 2028 under existing UK Government proposals.

Those eligible for the New State Pension (post April 2016) can enjoy a one per cent rise in their weekly State Pension for every nine weeks they postpone claiming the payment, equating to nearly 5.8 per cent additional income for each full year deferred.

The New State Pension is now valued at £230.25 per week for the 2025/26 financial year. Individuals due to retire who opt to defer claiming the State Pension will gain an extra £13.35 each week - equivalent to a boost of £694.20 over the next 12 months.

According to Just Group, those who reached retirement age before April 6, 2016, but chose to defer claiming the Basic State Pension, receive more generous terms. These retirees get an additional one per cent State Pension income for every five weeks deferred, equal to an annual increase of 10.4 per cent or £954.20, which can be taken either as extra income or a lump sum, reports the Just Group's research suggested that women (26%) were significantly more likely than men (19%) to be unaware of the option to defer the State Pension, while 26 per cent of those aged 75 and over also did not know deferral was an option.

Stephen Lowe, group communications director at Just Group, weighed in on the recent study, noting: "Deferring can be a good option for people who don't need the income immediately - perhaps because they are still working or have other sources of cash - so it is disappointing a quarter of those approaching State Pension age don't know about the option."

He also remarked that awareness is essential: "While deferring might not be the right option for everyone, it should still be something everyone knows about given that the State Pension is widely considered a 'bread and butter' source of income in retirement, with 3.4 million retired households relying on it for more than half of their yearly income."

Lowe continued to discuss the less alluring aspect of deferment due to recent changes: "Deferring has become less attractive in recent years because the terms have become less generous for those who reached State Pension age on or after 6 April 2016 and there is no option to take the deferred income as a lump sum. However, even for those who reached State Pension age after that date, in some circumstances it can still make sense to forgo some income in the short-term for a higher income in later life that is currently guaranteed to keep up with inflation."

Emphasising the significance of the State Pension as a foundational element of many retirees' income, Lowe insists it's imperative for individuals to comprehend every choice available to them.

State Pension payments 2025/26

The New and Basic State Pensions increased by 4.1 per cent on April 7, additional elements such as deferred rates have gone up by 1.7 per cent.

Full New State Pension

• Weekly payment: £230.25 (from £221.20)
• Four-weekly payment: £921 (from £884.80)
• Annual amount: £11,973 (from £11,502)

Full Basic State Pension

• Weekly payment: £176.45 (from £169.50)
• Four-weekly payment: £705.80 (from £678)
• Annual amount: £9,175 (from £8,814)

Future State Pension increases

The Labour Government has pledged to honour the Triple Lock or the next five years and the latest predictions show the following projected annual increases:

• 2025/26 - 4.1% (the forecast was 4%)
• 2026/27 - 2.5%
• 2027/28 - 2.5%
• 2028/29 - 2.5%
• 2029/30 - 2.5%

State Pension and tax

The Personal Allowance will remain frozen at £12,570 over the 2025/26 financial year. It's crucial to note that individuals solely on the full New State Pension will not be liable for income tax for the next two years. However, older people with additional income from employment, private or workplace pensions may need to pay tax.

The tax paid is only on the amount exceeding the personal allowance, not the entire sum. Those with additional income on top of their State Pension may need to pay tax. This is paid a year in arrears, so if the uplift for the 2025/26 financial year pushes you over the threshold, you won't receive a tax bill from HM Revenue and Customs (HMRC) until July 2026.