Investment DecisionsWhen you reach the State Pension age and have the opportunity to take your well earned State Pension, there are essentially two options:

1) Take it.

2) Don’t take it.

If you take it, you will begin to earn whatever annual income you have built up entitlement to over the years you have worked.

If you choose not to take it though, you will earn an increase in your State Pension for life of 1% for every 5 weeks that you defer taking it. This might seem like a fairly attractive option to those still working beyond State Pension age, or not necessarily needing the income at that time.

However, delaying it by a whole year would result in an increase in your annual State Pension of 10.4%. That means for the year of income you have given up, the Government will pay you back 10.4% every year for the rest of your life.

The issue I have with that is it will take you at least 10 years to get back the income you gave up, e.g. 100% of the first year’s income given up is paid back 10.4% each year.

If we assume you save the money (because you don’t need it and is why you are thinking of delaying it) and earn interest on it, then it will be more than 10 years before you get back what you have given up in that first year’s State Pension plus interest.

Obviously we all hope that we will live well beyond 10 years after retiring, but giving up the money in your early retirement years, when you could arguably enjoy it more, is convincing in my view. The alternative view would be that you might need it more in later life when there may be a need for specialist elderly care, for which fees and homes are expensive.

There are arguments both ways but you should know that there is a decision to be made when you reach State Pension age and that decision has important implications. Getting a little financial planning advice on this area as you approach retirement could therefore be very helpful indeed.

Blog by Jaskarn Pawar

Jaskarn Pawar is an experienced and award winning Chartered and Certified Financial Planner. He advises people all over the UK on financial planning and wealth management issues to help them reach solutions to fit their personal needs. You can contact Jaskarn on 01604 211234 or by e-mail on