Guaranteed pension income of 6% - but thousands are missing out

There's a special deal available, for a limited time only, that will mean you get a market-beating 6% return on a pension investment - guaranteed for life.

It sounds like a too-good-to-be-true pitch from an oily con man, but it's actually a government offer - designed to appease people who just miss out on the flat rate pension that came in this April. It's a great deal for a lot of people, so is worth investigating.

What is it?

The scheme is catchily known as making national insurance class 3A voluntary contributions, which will increase your state pension payments for life. They are available to men born before April 6 1951 and women born before April 6 1953 - as long as you are already getting your state pension.

You can get between £1 and £25 extra every week, and how much each £1 costs depends on your age. Someone who is 65 would pay £890 for every extra £1 of pension per week, so to get the full £25 would cost £22,250 - which is a return of almost 6%.

The older you are, the cheaper it is to buy the extra payments, so someone who is 70 has to pay £779 for each extra £1 of pension.

The payments are inflation-linked, so won't lose their value as time goes on, and for married couples, the partner will receive at least half of the extra pension after your death.

The level of return on your investment is far more generous than any annuity provider could possibly offer. Yet Old Mutual Wealth has discovered that only 3,848 people signed up in the first six months.

The situation is even more alarming, because you only have until April 5th next year to make the payment.

Should you?

It's a great deal, but it's worth pointing out that it won't suit people who are in poor health, because if you die long before your life expectancy would indicate, then you will lose out. If, for example, you bought the full £25 a week extra at the age of 65, then you would break even at the age of 81.

If you take money out of your pension to pay for it, you also need to be aware of whether or not you are taking more than the tax free lump sum. It's not out of the question, but if you do, you will pay tax, and this needs to be factored into your calculations when you're working out whether it's a good idea for you.

If you have gaps in your national insurance record, you would also get a better return by filling these gaps first, with ordinary Class 3 voluntary contributions.

In some cases, it might be worth talking things through with someone from the free government pension service, Pensions Wise. They won't be able to offer advice, but will explain the pros and cons.

At that point, you may still decide against the top ups, but at least you will have made a positive decision, and not simply missed out.