State pension top-up scheme to be launched


People will be able to boost their state pension income by up to £1,300 a year when a new "top up" scheme is launched tomorrow.

Pensioners and anyone reaching state pension age before April 6, 2016 will be able to buy an additional guaranteed income, in exchange for making a one-off lump sum payment.

They are being offered a chance to increase their state pension by up to £25 a week - equating to up to £1,300 in extra pension payments a year.

The scheme will be open for 18 months and it has been estimated that 265,000 people may be interested in taking it up.

Pensions Minister Baroness Altmann said the top ups could be particularly attractive to women and people who have been self-employed who are looking to build up their state pension payments - although they will not be the right option for everyone.

As well as being guaranteed for life, the extra payments are index-linked, meaning they are protected from inflation.

The extra payments are also inheritable. In most cases, surviving spouses and civil partners will get at least half of the state pension top up payment after death.

Surviving partners will tend to get the extra pension once they reach state pension age themselves, if they have not already reached it.

The cost of buying some extra state pension income will be lower for people who are older, as life expectancy is taken into account. This means that some people may want to wait until their next birthday before applying.

For a 65-year-old, an extra £10 of pension a week will cost £8,900, while for a 75-year-old the contribution rate for the same amount of pension is £6,740.

Like the state pension, state pension top up may be taxable as income, so people considering it would need to work out how much money they would receive after tax.

A new, simpler state pension will be introduced from April 2016, with the aim of helping future savers.

Baroness Altmann said: "Top up is an opportunity for people already retired, or reaching state pension age before April 2016, to boost their later life income.

"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.

"With the scheme launching tomorrow, anyone who thinks they might benefit should seek advice and can visit our online calculator and find out more."

More information on state pension top up and how to apply is available at

Tom McPhail, head of retirement policy at Hargreaves Lansdown, said the scheme is an "attractive deal", adding: "If you are eligible and you want to buy yourself some inflation-linked guaranteed income for life, with death benefits for your spouse thrown in too, then this is the scheme for you."