Pensioners over the age of 61 will be able to get higher pensions by topping up their payments by up to £25 a week from the autumn of 2015 under new Government plans.
The scheme will be available from October 2015 to all those who have reached state pension age by April 2016, including existing pensioners, which means men who were born before 6 April 1951 and women born before 6 April 1953.
The cost of the top-up will be based on the person’s age and average life expectancy and, according to the Government’s online calculator, means that a 65-year-old will have to pay £890 in total in order to get an extra £1 a week in pension, while a 75-year-old will have to pay £674 to get the same result.
Announcing the plans, pensions minister Steve Webb explained that the top-up will allow people to boost their pension by paying a new class of voluntary national insurance contributions (NIC) called “class 3A”.
According to Mr Webb, the scheme will give retirees a guaranteed, index-linked return and will be particularly attractive for women pensioners, who will draw the higher pension for longer, and the self-employed, who currently qualify for only the basic state pension. In addition, the top-ups can be inherited, with a surviving spouse or civil partner entitled to at least 50 per cent of the additional state pension.
People are now being invited to pre-register their interest in the offer, which is open for 18 months, and the Government estimates that around 265,000 will do so, based on research carried out earlier this year to gauge possible interest in the scheme.
However, critics claim that the scheme is not as good a deal as an existing pension top-up plan, which is also collected via Class 3 NICs, and also warn that, as the income is taxable, could mean that people would be better off contributing to an Isa.