State Pensions: Don’t miss the six month window to top up your State Pension


iStock_000007329749XSmallThe introduction, from 2016, of the new flat rate State Pension, will benefit millions of people retiring in years to come. Until now it was thought that people retiring over the next two years, or who are already drawing their State Pension, would miss out, but new proposals have revealed how these people will be able to top up their State Pension.

The flat rate State Pension, also known as the single-tier State Pension, will be available to anyone retiring after April 2016 who has made National Insurance contributions for 35 years. Those people who have paid National Insurance for a shorter period will receive a lower pension; although an absolute minimum of 10 years contributions need to have been paid to qualify for anything.

At the time of the original announcement the flat rate State Pension was set at £144 per week, although this will be increased in line with inflation up until 2016.

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Two tier system

Existing pensioners, as well as anyone retiring before April 2016, will not qualify for the flat rate State Pension; leading to accusations of unfairness and a two tier system.

The Government has now moved to address these concerns and will allow millions of pensioners who don’t qualify, either because they have already retired or they will stop working before April 2016, to top up their existing State Pension by up to £25 per week.

The new arrangement means men born before 6th April 1951 and women born before 6th April 1953 will be able to effectively buy additional State Pension to bridge the gap between the current income it provides and the new flat rate, a difference of up to £40 per week.

Commenting on the top up, Pensions Minister, Steve Webb, said: “You can fill gaps in your national insurance record and you can turn your savings into a return from the government. This is being temporarily introduced from October 2015 for those who reach pension age before the single tier state pension is introduced.”

The exact details and costs are still to be confirmed, although we do know that:

  • Any additional pension bought will increase each year in line with inflation
  • The additional pension can be passed on to your spouse if you die before they do
  • People will be able to buy the additional State Pension from October 2015 onwards. The option is only likely to be available for a limited period, possibly only six months, so people wanting to increase their State Pension will need to move quickly

The offer is likely to be worth considering for millions of pensioners who have incomplete National Insurance records and therefore do not get a full State Pension or simply as a means of buying a higher, guaranteed income, which will rise in line with inflation.

As more details are announced, including the cost, we will update readers through our website and our newsletter, which you can register for by clicking here.