13th October 2015 at 4:19pm
Around seven million people in the UK are being offered the chance to top up their State Pension to boost their later life income. Should you take the opportunity to top up? There are a few things you need to consider before making that decision particularly as there is only a limited time to take advantage of this
State Pension top up: The facts
From 12 October, you can pay a lump sum to increase your State Pension by between £1 and £25 extra a week, that’s up to £1,300 a year.
How much you’d need to pay depends on the extra amount you want each week and your age; the younger you are, the more you’d need to pay. Men aged at least 65 and women aged 63 or more are eligible.
Topping up your State Pension could give you more financial security for life but it’s not right for everyone and isn’t a decision to rush into with 18 months to go before the 5 April 2017 deadline..
But as our recent blog explains, many people aren’t aware they won’t actually get the full flat-rate State Pension if they haven’t made enough National Insurance contributions. Knowing what you could get and how much top up you might want to make is an important part of the picture when you’re considering your retirement options.
As Jamie Jenkins, Head of Pensions Strategy at Standard Life says: “Most people will benefit from speaking to an independent source, such as the Pensions Advisory Service, or a financial adviser.”
“Most people will benefit from speaking to an independent source, such as the Pensions Advisory Service, or a financial adviser.”
The question is, do the sums stack up for you?
Calculate how much you would need to pay in
You can work out how much a top up would cost you by using the gov.uk website.
Here’s a typical illustration:
You are 68 years old in October 2015 and want an extra £5 per week, or £260 a year, on top of your State Pension.
The cost of an extra £1 per week for a 68 year old is £827, so you multiply £827 by 5. You’ll need to make a lump sum payment of £4,135.
It’s also worth knowing that should anything happen to you, in many cases, surviving spouses and civil partners will be able to inherit at least 50% of the extra pension.
More about the State Pension
If you find this useful, read more on our blog The new State Pension: Why many people won’t get what they expect
Find out how to get a statement on how much State Pension you may be due here.
Calculate when you’ll reach State Pension age by using the State Pension calculator.
Join the conversation
This blog and any responses are not financial advice and is correct as of October 2015.