State pension top up opportunities
22nd September 2015
In the Autumn Statement 2013 the government announced its intention to introduce a scheme to allow pensioners to top up their additional State Pension with a new class of voluntary National Insurance contribution to be known as Class 3A. This will allow some of today’s pensioners and those close to pension age to boost their retirement incomes.
In the Budget Statement in March 2014 the government announced more details about how the scheme will work. The Minister for Pensions announced further details and the rates of the Class 3A contributions in a statement in April 2014.
The scheme will open in October 2015 and will be available to all pensioners who reach State Pension age before the introduction of the new State Pension in April 2016. The scheme is expected to run for 18 months.
Class 3A will give pensioners an option to top up their pension by up to £25 a week in a way that will protect them from inflation and offer protection to surviving spouses. In particular, it could help women, and those who have been self-employed, who tend to have low additional State Pension entitlement.
From 12 October 2015 to 5 April 2017 you’ll be able to make a ‘Class 3A voluntary contribution’ to top up your State Pension by up to £25 per week.
To be able to benefit from this opportunity you must be:
entitled to the basic State Pension or Additional State Pension before 6 April 2016 and either
a man born before 6 April 1951 OR a woman born before 6 April 1953
You can choose to top up your State Pension by between £1 and £25 per week. How much you’ll need to contribute depends on:
how much extra pension you want to get each week
how old you are when you make the contribution
So for exampleyou are a 68 year old male in October 2015. You decide that you want to get an extra £5 per week (£260 a year) on top of your pension.
The cost of an extra £1 per week for a 68 year old is £827, so you multiply £827 by 5. You will make a lump sum payment of £4,135.
The opportunity window is limited but it may suit many, but not all, pensioners. As always take further advice so that you understand the implications before you proceed.
All content is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this blog without taking individual advice based on the full facts of your case. The information given was correct at the time of publication.