State Pension Top Up
On 12th October 2015 the Government announced an opportunity for certain individuals to ‘top up’ their State Pension entitlement. The purpose of the announcement was to help those who have already reached State Pension Age (or who shortly will) to reduce the gap between the current full Basic State Pension of £115.95 per week and the new higher Basic State Pension of £155.65 per week, which is being introduced in April 2016. The closing date for topping up is 5th April 2017.
To qualify you must:
Reach State Pension Age (SPA) before 6th April 2016 or who have already passed SPA
Must have been born before 6th April 1951 (men) and before 6th April 1953 (women)
The maximum additional State Pension that can be purchased is £25.00 per week. The minimum is £1.00 per week. Payment is made in the form of a single contribution and it is classed as a Class 3A voluntary National Insurance contribution.
Example costs for purchasing an additional £10.00 per week are as follows:
65 year old man or woman: £8,900.00
75 year old man or woman: £6,740.00
From this we can see that, excluding inflationary increases, a 65 year old would have to survive c. 17 years (if a non-taxpayer) or c. 21 years (if a basic rate taxpayer) to receive the full purchase price back in the form of pension payments.
For a 75 year old it would be c. 13 years and c. 16 years respectively.
In our opinion the offer represents a decent deal if future inflation is relatively high, you are married and you and your partner are in good health. However, if inflation remains low, and/or if you are single and/or in poor health, it is less likely to be of any real benefit.
For further information please contact us.