Should I defer my state pension? In some cases, absolutely not, but in other cases, it makes sense. A client asked me this question recently, and my answer was certain. No way, you need to get your state pension at 66. Another client wanted to delay receiving his. That was more for personal reasons, which I will fill you in on below. Let’s look at
- What does it mean?
- Don’t Defer
- Defer
- Summary
What does it mean?
Deferring your pension means that you put off receiving your state pension for one to four years. The main advantage of delaying the pension is that you’ll get a higher payment the longer you defer it. From 1 January 2026, the weekly state contributory pension amount is €299.30
| Age when you start to claim | Maximum weekly personal rate |
| 66 | €299.30 |
| 67 | €313.40 |
| 67 | €328.90 |
One of the downsides of deferring is that you’ll continue to pay PRSI on your income. From 1 January 2024, you continue paying PRSI up to the age of 70 or up to the date you are awarded the state pension.
Don’t Defer
I said to Wyatt Earp, “Don’t defer your state pension, Wyatt, sure you’ll save a small fortune in PRSI”
Wyatt is a high-flying criminal law barrister based in Cork. He puts the criminals away for the State and is damn good at his job. His income reflects his ability. He made a profit of €510,000 in 2024. He’ll be 66 on the 30th of December 2025. Wyatt has no intention of retiring, given his good health and his love for putting “bad hombres” away.
His profits in 2025 will be higher than in 2024 and he has lots of cases in the pipeline for 2026. We will assume a profit of €550,000 for 2026. Along with that, Wyatt has an annual rental profit of €30,000. So, his estimated taxable income for 2026 will be €580,000.
Saving
The self-employed PRSI rate for 2026 is 4.2375%. If Wyatt doesn’t take his state pension at 66, he would pay PRSI in 2026 of
| €580,000 x €4.2375% | €24,578 |
He would also forego the state pension of €15,564, bringing the total loss to €40,142. Plus, the tax rate on your state pension is lower as there is no USC. With no PRSI and USC, the rate will be 40% for Wyatt. The net benefit to him will be
| State pension | €15,564 |
| Deduct tax 40% | (€6,225) |
| Amount after tax | €9,339 |
| PRSI saving | €24,578 |
| Total saving | €33,917 |
Once Wyatt starts getting the state pension, the option to defer is no longer available.
Defer
Donal Dwan is going to defer. He doesn’t care about the money. For him, it’s personal. You see, Donal doesn’t like his mother-in-law, Mary Bridget Codd. It would be closer to hate, but it doesn’t sit well with him saying that word. Donal’s wife, Sheila, dropped a bombshell on him last year, saying that she wanted to be closer to her mother. Look after her in her older years, and that she was coming to live with them.
It was a case of bye-bye man cave and hello mammy-in-law. Donal was 65 at the time and had planned to retire at 66 in the Summer of 2025. Now retiring would be his worst nightmare. He has no intention of making jigsaws with “mad Mary” when Sheila is working and out with her mates. As a lecturer, Donal can keep working for the next few years. He now plans to retire at 68, but could delay it for longer if Mary hasn’t kicked the bucket.
PRSI Payments
His salary is €75,000 per annum. He’ll keep paying PRSI until he gets the state pension or turns 70. Donal doesn’t need the pension when he’s working. For 2026 and 2027, he’ll pay PRSI on his salary of
| 2026 | €75,000 x 4.2375% | €3,178 |
| 2027 | €75,000 x 4.5% | €3,375 |
He’d also pay PRSI on any self-employment profit, and on unearned income like rent or dividends. Based on rates applicable from January 2026, if he gets his state pension at 68, his weekly payment will be €328.90. For a full year, that comes to €17,103.
With his other pensions, Donal predicts that his income that year will be €40,000. Sheila will have retired by then, and her income will be about €35,000. He knows this will be all at the lower tax rate, as they can earn up to €88,000 without going into the 40% bracket.
Another benefit
Another benefit for Donal is that he’ll get a full state pension as he was short a couple of years. He’ll have 48 years PRSI contributions by the time he reaches 68. That will give him the full state pension. The pension rates by contribution average for 2025 are
| Yearly average contributions | Maximum personal weekly rate at 66 |
| 48 or over | €289.30 |
| 40 to 47 | €283.70 |
| 30 to 39 | €260.10 |
| 20 to 29 | €246.30 |
Donal doesn’t defer
If Donal doesn’t defer the state pension and keeps working, he’ll save PRSI and have extra income.
| State pension at 66 | €15,000 |
| Less Tax at 40% | (€6,000) |
| Net after tax | €9,000 |
| Add PRSI saving 2026 | €3,178 |
| Total extra income | €12,178 |
Remember, there’s no USC on the state pension, and he’ll stop paying PRSI once he draws it down.
Summary
For Wyatt, deferring his state pension would have been crazy. There was a massive PRSI saving for him. Plus, he’d get the state pension on top of his already hefty earnings.
For Donal, it was a case of swings and roundabouts. He wanted to keep working to get out of the house. By deferring it and continuing to pay PRSI, he would have more contributions, which would give him the highest pension. And the pension was even more by electing not to get it until he was 68. Saying that, if he did access the pension at 66 and continued working, he’d save the PRSI cost and have more income too.
If I were Donal, I’d take the pension. A bird in the hand, as they say. Spend the extra money on a few nice holidays when you can.
State pensions pay a huge part of your retirement income. You could even say that paying tax (PRSI anyway) has its benefits!
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