State Pension Top-ups
April 24th, 2015
The Department for Work and Pensions (DWP) has published guidance, in the form of two factsheets, on topping up the Basic State Pensions. These two factsheets set out the slightly different rules applying to these two categories of individuals, depending upon when they were born:
- The first factsheet covers information for men born between 6 April 1944 and 5 April 1945 and women born between 6 April 1949 and 5 April 1950.
- The second factsheet covers information for men born between 6 April 1945 and 5 April 1950 and women born between 6 April 1950 and 5 April 1952.
By way of a reminder, it is possible to obtain a State Pension forecast by completing this on-line form. This form initially asks a number of simple questions and then presents a summary of how an individual’s State Pension is accrued, based upon whether they will qualify before 6 April 2016 or not. It then takes you to the on-line forecast of gives links to request a forecast through the post.
Topping up the Additional State
In addition to the payment of Class 3 Voluntary Contributions referred to above, the DWP are now also pushing to option to pay Class 3A Voluntary Contributions. For a limited period, individuals will have the option to secure between State Second Pension of between £1 p.w. and £25 p.w. in exchange for a one-off payment.
The option to pay Class 3A Voluntary Contributions will from 12 October 2015 to 5 April 2017. This will apply to:
- men born before 6 April 1951
- women born before 6 April 1953
i.e. individuals who will have reached their SPA on or before 5 April 2016, i.e. the last day prior to the introduction of the new Single-tier State pension.
The actual cost of these Class 3A NICs will depend upon a number of factors, including:
- Age of the individual
- The weekly amount of Additional State Pension to be secured.
- The date the payment is made
The DWP give the following example:
An individual 68 years old in October 2015. Who decides they wish to secure an extra £5 per week (£260 a year) on top of their existing pension.
The one-off cost would be £4,135.
This equates to an equivalent “annuity rate” of just under 6.29% as compared to a market rate of 3.35%.
Source: (MAS comparison for a male (spouse 3 years younger) for an indexed linked annuity, with a 50% widow’s pension, without any health issues and a North East post code).
The DWP have previously launched an on-line calculator to allow individuals to obtain an indicative quote as to how much it will cost them to secure a specific week amount.
Individuals can already register their interest after completing the on-line calculator by e-mailing firstname.lastname@example.org. An acknowledgement e-mail is received immediately. Once an individual has registered, they will receive an e-mail providing them with more information.