The UK government’s Department for Work and Pensions (DWP) announced on Monday that people eligible to receive a State Pension before 6 April 2016 can increase their pension income by between GBP1 and GBP25 per week by obtaining a State Pension top-up, from 12 October 2015.
According to the DWP, the State Pension top-up scheme can provide additional guaranteed pension income for life and could boost a lifetime retirement income up to GBP1,300 annually.
These pension payments are protected against inflation and a surviving spouse or civil partner can also inherit between 50% and 100% of top up income.
Eligible claimants for a top-up must be entitled to the basic State Pension or Additional State Pension and be either a man born before 6 April 1951 or a woman born before 6 April 1953.
Successful applicants need to make a lump sum contribution by 5 April 2017, however the amount of the Class 3A contribution depends on the age of the applicant and the amount of extra income they require. Younger applicants will pay more for a given level of income. For example, if someone aged 65 wants an extra income of GBP10 per week, they would have to pay a lump sum of GBP8,900, while those aged 75 would only have to pay GBP6,740.
Approximately seven million existing pensioners and anyone who will reach state pension age before April 2016 will qualify for the scheme, according to the Pensions Policy Institute (PPI). The current basic state pension is worth up to GBP115 .95. After April 2016, the government will introduce a single tier flat-rate pension worth up to GBP155 per week.
However, the BBC reported that the DWP expects around 265,000 eligible people to apply for the top-up scheme and has conceded that it will not be suitable for everyone.
Pensions Minister, Baroness Altmann, was quoted as saying: “It won’t be right for everybody and it’s important to seek guidance or advice to check if it’s the right option for you.
“But it could be particularly attractive for those who haven’t had the chance to build significant amounts of state pension, particularly many women and people who have been self-employed.”