From October 2015, people who reach their state pension age before April 2016 will be able to boost their state pension by paying additional National Insurance contributions.
The plan to launch Class 3A NICs – called ‘state pension top-up’ – was announced last December. The Government says that the state pension top-up has been set to make sure that both individual contributors and taxpayers get a fair deal. The contributor can buy a maximum of £25 a week extra pension.
Topping up the state pension has its benefits. Currently, increases to the state pension are protected by the triple-lock guarantee and any top up is inheritable on death with a minimum of 50% for the surviving spouse or civil partner.
The state pension top-up that people can buy far exceeds the private pension currently available on the open market. The maximum top-up of £22,250 would buy a 65 year old £1,300 a year (£25 a week) extra state pension, which is about twice as much income as the equivalent annuity.
| Age | Contribution needed for £1 a week of additional state pension |
| 65 | £890 |
| 70 | £779 |
| 75 | £674 |
There is only a short window of opportunity – 18 months – for those interested in buying state pension top-ups. There will also be a three-month cooling-off period if people change their minds.
The Government has set up a website with information and calculators about this option.
More details are available at: www.gov.uk/state-pension-topup
