Delaying when you take your pension

We have an exciting amount of choice in our lives these days. Whether it’s the way we shop, or how we communicate, there’s more freedom over how we do things. This is also true when it comes to how you choose to retire.

And because we're living longer, delaying your retirement might be one way to approach it.  You could take your time and ease into things.

More and more of us are choosing to extend our working-lives.

Perhaps you don’t feel ready to retire yet because you still enjoy your role at work. Or maybe you wouldn’t have enough money to live on if you retired right now, so you want to put a bit more into your pension savings first.

If you're thinking of postponing the original retirement date you selected, one of first things we’d recommend is contacting your plan or scheme provider to talk through your options.

Choosing to phase your retirement 

More and more of us are choosing to extend our working-lives. That could mean leaving full-time employment and going part-time, or trying something new like starting your own business. By continuing to work you may be able to contribute more money into your pension and take advantage of the tax benefits in doing so. That might mean you could have a bigger pot when you do decide to retire completely.

You can delay your State Pension too

Although you can't take your State Pension before your State Pension age, you can delay taking it until a later date. If you do start claiming it at a later date, you'll receive a higher income that is equal to the amount of pension you would have got, plus interest. 

Key things to consider

  1. By delaying when you take your pension, your pension funds may have grown but there’s a chance they might have gone down in value too. It could mean you have less money when you come to take your pension and you may not get back what you put in.
  2. You should check with your pension scheme or provider about any restrictions that may apply for delaying your retirement date, and the process and deadline for telling them.
  3. Find out about whether there are any costs for leaving your pot where it is – there may be an administration fee or ongoing charges for continuing to manage your pension.
  4. If you eventually decide to use your pension savings to provide an income, there is no guarantee you will receive more, or even the same amount as if you were doing so now. For example, annuity rates may have changed.  In addition, the income you lose out by delaying, may outweigh any growth on your fund from leaving it where it is.
  5. There may be guarantees that you could lose, or restrictions or adjustments that are applied to your pension, that you will need to consider if delaying taking your pension beyond the original retirement date.
  6. State benefits that you may be entitled to, may be affected if you delay your retirement date.

If your pension pot exceeds a lifetime allowance you may be subject to a tax charge. You may also have to pay tax when you start taking an income from your pension. Understanding tax rules can be complicated so we’ve prepared a guide to show how this may affect you.

When deciding what to do with your pension pot you should be aware that different providers offer different products that may be more suited to your individual circumstances. Each product option could also have different tax implications. Their rates, investment funds, charges and terms may also be different.

For example, with an annuity they might use different criteria to assess you or your partner’s health and/or lifestyle conditions, this is often called an enhanced annuity. This might mean that you could get a higher level of income elsewhere.

This is why it’s important to shop around - so that whatever you decide to do, it’s the right decision for you.

More information

We are not recommending a particular retirement option, or course of action, over another. There are other options available, which you can read more about using the related links below.

In addition to the support we offer, we recommend that, from age 50, you seek impartial guidance from Pension Wise, the free service from the government that is available on the internet, over the phone or face to face.

Check everything thoroughly with your provider too, as although you no longer have to buy an annuity by your 75th birthday, there may be similar-type rules specific to your plan or pension scheme.

Further information about tax and deferring your State Pension can be found on the  website. The Pensions Advisory Service can also offer general pension guidance.

Need help? Have questions?

If you're looking for further information or want to chat about your product options, we can help.

Contact us