Defer pension – can I delay taking my pension?

• Can I defer my private pension?
• When can I access my pension?
• Benefits of deferring your pension
• Delaying your pension - what to be aware of

In this guide: The pros and cons of delaying taking your pension until you’re older and where to find expert guidance or advice.

Can I defer my private pension?

Yes, you can defer your private pension, money purchase scheme or defined contribution pension. Even though you probably chose a date to start taking benefits when you set it up, you’re not obliged to take your pension when you reach this age. You could decide to leave it untouched and retire later. Alternatively, you could move it to another provider and then leave it invested until you need it. The decision is yours.

When can I access my pension?

You are entitled to access your pension pot once you reach the age of 55 (57 from 2028); however, you’re under no obligation to do so.

If you already have enough income to live on, perhaps because you’re carrying on working or have other income from savings or investments, you could delay taking any money out of your pension until you need it.

If you have more than one pension you may want to consider consolidating them into one scheme.

Is deferring a pension a good idea?

If you are not ready to retire, want to build more retirement savings, or simply don’t need to claim your pension yet, deferring your pension may be a good idea.

As with any major financial decision that could affect the rest of your life, it’s important to weigh up the benefits and risks before going further.

Benefits of deferring your pension

Putting off taking an income from your pension has a number of benefits:

• The money within your pension pot stays invested, so it can potentially continue growing – leaving your money invested is also more tax efficient for you.
• The money in your pension is not normally included in your estate for Inheritance Tax purposes.
• The longer you leave it before you start drawing an annuity, the older you will be – meaning you could be offered a better annuity rate, although this is not guaranteed
• If your health worsens as you get older, you are likely to qualify for an 'enhanced' annuity at a better rate.

Delaying your pension – what to think about

• If you decide to delay your pension, will you miss out on any guarantees or bonuses, or will you find your choices become more limited due to existing restrictions?
• Is it the most tax-efficient choice for you?
• Compare it with other sources of income you could draw on if you defer your pension. For example, if you have ISAs, they are tax free, so it might make sense to leave them in situ. This decision will be affected by your current circumstances and tax liabilities.
• Remember, investments can fall as well as rise, and your pension pot is invested. If those underlying investments fall, you could end up with less money to drawdown or convert into a pension annuity when the time comes– meaning less income for your retirement.
• Future annuity rates can't be guaranteed, and you might lose out if they drop while you delay taking your pension.
• Inflation could have an adverse impact on the value of your pension pot, if prices rise faster than the underlying investments in your fund.