Millions of pensioners could net the best deal in personal financial planning this year, advisers say — by simply deferring their state entitlement.

About 700,000 people will reach state pension age over the next year and millions more already in receipt of it could defer from now on, receiving an effective return of more than 10% a year.

“It’s a bargain — one of the best deals anywhere in the world of personal financial planning,” said Laith Khalaf at Hargreaves Lansdown.

For every five weeks you defer, the government increases your entitlement by 1% — giving an annual return of 10.4%. Typically, if you live for nine years after you start taking benefits, you will be better off.

A 65-year-old would have to achieve a return of 8.89% on private pension savings, after charges, to match the rate on offer from the government. This falls the older you get due to annuity rates rising with age but still stands at 7.19% at 70.

“These kinds of returns are possible but you’d be lucky to achieve them and would need a heavier exposure to risky assets than is desirable as you near full retirement,” said Khalaf. “By contrast, if you defer the state pension for extra income you know what you will get — with no market or annuity-rate risk.”

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