What is the “state pension top up scheme”?
As of Monday, existing pensioners and those who will reach retirement age before 6 April 2016, and who are entitled to the state pension, can boost their future payments by up to £25 per week, by making an upfront lump sum payment.
Why is this happening?
The government is shifting everyone towards a new, more generous state pension, worth at least £151.25 per week, from April 2016. The “top-up” scheme is designed to help those who will already have retired before that date, and would otherwise miss out.
Who is eligible?
In order to qualify, a man must have been born before April 6 1951 and a woman must have been born before April 6 1953, as well as being eligible to receive a UK state pension.
How long will the extra payments last?
The extra pension from the top-up scheme will be paid for the rest of the pensioner’s lifetime, and may be inherited by their spouse or civil partner. They will increase in line with inflation each year, as measured by the consumer price index.
How much will it cost?
That depends on the applicant’s age, and how big a top-up they want to purchase – from £1 a week to £25.
In one theoretical example given by the government, a 68-year-old man decides he wants an extra £5 a week or £260 a year on his state pension. This will cost him £4,135.
To get the maximum extra £25 a week (£1,300 a year) of state pension, someone aged 65 would need to pay more than £21,000. As you get older, the cost comes down. More details, including a top-up calculator, are available online.
When does the offer expire?
Unlike the government’s subsidised “pensioner bonds”, which caused a stampede when launched in January, there is an 18-month window to apply for a pension top-up.
How can pensioners decide whether to apply?
Anyone considering the deal should establish whether they have the cash to make the upfront payments, and how the higher pension income will affect any means-tested benefits they are receiving, such as pension credit. The top-ups may also be unsuitable for people who are in poorer health or have a lower life expectancy.
