Claim your pension early, or wait for a bigger one?
Deferring buys you a permanently larger, inflation-linked income for life — the closest thing to free longevity insurance most people are offered. The catch is the bridge: you fund yourself from your own savings in the meantime. This works out both sides.
Generic Every rate is editable, so this fits any scheme — set the reduction and uplift percentages your own system uses.
Annual pension at each claiming age
Every claiming age, side by side
"Break-even" is the age at which the deferred pension's cumulative payments — discounted back to today — overtake claiming at the earliest age. Live past it and waiting paid off. "Money left at 90" is what remains of your own portfolio after funding the bridge years.
Cumulative pension received
Present value, discounted at your rate. The crossing points are the break-even ages.
What deferring does to your portfolio
Wait for the bigger pension and your savings carry the load in the meantime. Sometimes that's fine. Sometimes it's the whole reason not to.
Making sense of this one
Nearly every pension scheme lets you start early for less, or wait and get more. Here's how to think about the trade.
What you're actually deciding
Claiming early means a smaller cheque, permanently. Waiting means a bigger cheque, permanently — but you have to fund yourself in the meantime, out of your own savings. Those in-between years are called the bridge, and they're the real cost of waiting.
What makes deferring attractive is that the bigger pension is guaranteed, paid for life, and usually rises with inflation. That's an unusual combination — no investment product will sell you the same thing at anything like the same price. What makes it risky is that if you die early, you never collect.
David's full pension at 67 would be $30,000 a year. He can take it now at a 30% reduction — $21,000 — or wait until 70 and get 24% more, which is $37,200.
The gap between claiming at 62 and claiming at 70 is $16,200 a year, every year, indexed, for as long as he lives. But waiting means eight years of funding himself: with $60,000 of spending and no pension, that's a serious draw on his savings.
The break-even lands in his early eighties. Die before that and claiming early was right; live past it and waiting wins — and the longer he lives, the more it wins by. Since David is in good health with long-lived parents, he decides waiting is the better bet, but he checks first that his savings can actually carry the bridge without leaving him uncomfortably thin.
Reading the results
- The break-even age is the point where waiting catches up. It's the single most quoted number here, and it's also the least useful on its own — it tells you nothing about what happens either side of it.
- The portfolio chart is the one to watch. If the line dips alarmingly low during the bridge years, deferring may be theoretically better and practically unavailable to you.
- The "money left at 90" column combines both effects — the bigger pension and the cost of the bridge — into one number. That's usually the most honest single comparison.
Worth knowing
Deferring is best understood as insurance against living a long time, not as an investment. Most people slightly underestimate how long they'll live, and the real risk in retirement isn't dying early with money left over — it's being 92 and short. A larger guaranteed income is the cleanest protection against that, which is why the general advice leans toward waiting where you can afford to.
Do check your own scheme's rules, though. Some taper the reduction differently across the early years, some have earnings tests if you're still working, and survivor benefits vary a lot. The rates on the left are all editable so you can put your real figures in.
General information only — not financial advice. This model assumes the pension is fully indexed to inflation once in payment, that reduction and uplift rates are flat per year, and that your portfolio earns a steady return with no volatility. It ignores tax, means testing, survivor and spousal entitlements, and any earnings test that applies while you are still working — all of which are significant in most real schemes. Check the rules that apply to you before deciding.