Staying invested or deferring
Sometimes your circumstances may mean you decide to delay converting your pension into a retirement income. It may be that you decide to continue working or that you don't need the money just yet.
By remaining invested you can continue paying into your pension savings and should your funds grow, your pension pot could potentially provide more income. In this case you need to understand the funds you are invested in and ensure they match your appetite for risk.
Timing can play a big part in the income you will receive when you retire and you can choose to defer your State pension as well as any personal or company pension you are entitled to.
Use our retirement budget calculator to help you make a decision.
|Staying invested or deferring|
|Your pension pot may be larger if you’re able to pay into it for longer or leave it invested for longer.||Depending on how your pension is invested, the value of your pension pot could go down as well as up, so there is no guarantee that your pension pot will be larger if you delay taking your benefits.|
|You may get a higher income because your pension will not have to pay out for as long.||You may get a lower income if the rates used in converting your pension pot into an income go down.|
|You may get a higher income if the rates used in converting your pension pot into an income improve.||The treatment of pensions has undergone major changes in recent years. There is no guarantee that the tax treatment of pensions or the choices available to you will remain the same in the future.|
Find out more...
Can I defer my State pension? -
Yes you can. When you reach State pension age, you will receive your invitation to start taking your State pension from the Pension Service.
If you are not claiming any benefits you don’t need to do anything.
If you are receiving benefits and wish to defer then you must inform them of this decision in writing.
Why defer your company or personal pension -
Your pension pot may be larger if you’re able to pay into it for longer or leave it invested for longer. You may also benefit from a higher annuity rate because your income will not have to pay out for as long.
However, depending on how your pension is invested, the value of your pension pot could go down as well as up, so there is no guarantee that your pension pot will be larger if you delay taking your benefits. You may get a lower income if the annuity rates used in converting your pension pot into an income go down.
What happens when you die? -
If you die before age 75:
Your untouched pension pots can pass tax-free to any nominated beneficiary.
The money will continue to grow tax-free as long as it stays invested, and, provided they take it within two years, the beneficiary can take it as a tax-free lump sum or as tax-free income. If they take it later, they will pay tax on it.
If you die age 75 or over:
Any amount the beneficiary takes out – lump sum or income – will be added to their income and taxed at their highest tax rate.
Lifetime allowance charges:
If the total value of all your pension savings when you die exceeds the lifetime allowance (currently £1 million) further tax charges will be payable by the beneficiary - read about it in our jargon buster.