NARPO – The voice of retired police officers
NARPO – The voice of retired police officers

The option to put off claiming the State Pension in return for a higher amount has been part of the system since 1948.

Initially, increments were based on the number of flat-rate contributions paid during the period of deferment. However, since April 1975, they have been calculated as a percentage of the basic State Pension and based on the length of time deferred.

The Labour Government made changes in the Pensions Act 2004, improving the rewards for deferral to encourage flexible retirement (Secretary for Work and Pensions report presented to Parliment – ‘Working and Saving for Retirement’ Dec 2002), ch 6, para 39-43) by:

For people reaching State Pension age from 6 April 2016 – and therefore eligible for the new State Pension – the reward for deferral has been reduced (to 5.8% of the weekly rate for each full year deferred) and the option of a lump sum has been removed (Pensions Act 2014, s16-18 (SI 2015/173, reg 10).

The Cridland Review of the State Pension age recommended that the Government re-introduce the option of a lump sum on deferral and change the rules to enable partial drawdown of the State Pension so that people could afford to continue working but reduce their hours (Independant review of State Pension Age ‘Smoothing the Transition’ presented to Parliment Mar 2017, para 5.6.1-2).

Use this link to view the State Pension deferral briefing doc from House of Commons Library Apr 2017.