Britons retiring this year can boost their annual state pension by £694 for free - but many don't know about it

Analysis by retirement specialist Just Group, based on Department for Work and Pensions data, reveals that 66 per cent of adults aged 40 to 65 are unaware they can delay taking the state pension beyond state pension age.

Among the 34 per cent who did know, many still lacked clarity. A third said they didn’t understand how deferral would impact their payments, and 8 per cent wrongly thought they would receive the same or less money.

In reality, deferring can lead to a significant income boost. People who reach state pension age on or after 6 April 2016 are entitled to the new state pension and can benefit from a one per cent increase in their weekly payments for every nine weeks deferred.

This works out as an extra 5.8 per cent income for each full year of deferral.

With the triple lock raising the new state pension to £230.25 a week for 2025/26, delaying by one year would push weekly payments up to £243.60, a difference of £13.35. In the course of a year, that adds up to £694.20 of extra income for life, not including future inflation-linked rises.

Yet very few people are taking advantage. The research found that just one in 10 adults aged 66 to 75 had chosen to delay receiving the state pension.

Stephen Lowe, group communications director at Just Group, said: "Deferring your state pension is effectively a trade-off between receiving your full state pension payments today or an increased state pension later.

"Delaying the state pension may not work for everybody but it’s certainly an option worth knowing about and exploring in more detail for those people who don’t need the money immediately.

"If you’re still working, deferring could help reduce your income tax bill in the short term and boost your pension income in later years when it may be needed more."

The most common reasons given for deferring were not needing the money right away (49 per cent), being attracted to a higher income later on (48 per cent), and wanting to wait until stopping work (20 per cent).

People on the old basic state pension, available to those who reached pension age before 6 April 2016, get an even better deal.

They receive an extra one per cent for every five weeks they defer, equal to a 10.4 per cent annual uplift. Based on current rates, this adds £18.35 a week or £954.20 a year. They also have the option of taking the deferred amount as a lump sum.

Lowe added: "The decision requires careful thought. It takes around 17 years to break even if you defer the state pension for a year so health and life expectancy are key considerations when weighing up whether you could benefit.

"Currently, any extra income accrued through deferring the state pension offers protection against inflation – a valuable safeguard for those planning for a long retirement."

While deferral won’t suit everyone, particularly those reliant on the money straight away, it could be a powerful option for those who are still working, have other sources of income, or expect to live into their 80s and beyond.

"Anyone who is unsure of their options can find further guidance from a range of sources," Lowe said. "The government’s free and impartial Pension Wise service is a good place to start while regulated financial advice remains the gold-standard."

Despite the benefits, deferral remains one of the least understood tools in retirement planning.

As more people continue working past state pension age, raising awareness of this little-used strategy could help many unlock a more secure and inflation-protected income later in life.