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Last chance to top up state pension

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Amy | Edited by Johanna

Updated 6 Apr 2017

State Pension Top-Up

State pension top-up scheme now closed. New applications for state pension top-up closed on 5 April 2017. If you applied before the dealine there's a 90 day cooling off period if you change your mind, so we're keeping this guide here for your information.

A top-up scheme which allows millions of pensioners who already get their state pension to pay to boost it by up to £25 a week closes on 5 April 2017. So if you want to take advantage you need to act NOW.

If you started drawing your state pension or were eligible to do so before 6 April 2016, you can pay a lump sum to get a guaranteed increase to your state pension for life. This guide explains how top-up works, who can do it and whether you should even consider it.

Who can do it?

The scheme closes on 5 April 2017 and is ONLY available to:

  • A man born before 6 April 1951 (so 66 or older); or

  • A woman born before 6 April 1953 (so 64 or older)

If this doesn't apply to you, you don't qualify for state pension top-up and you'll receive your state pension under the flat-rate system.

How does top-up work?

The state pension has been overhauled by the Government over the last couple of years, including the introduction of a flat-rate state pension (currently £155.65/wk) in April 2016.

However, a big chunk of pensioners who were already eligible for their state pension missed out on the flat-rate state pension and continue to receive their pension under the old scheme, which currently pays up to £119.30/wk basic state pension for those with at least 30 years of national insurance (NI) contributions (plus most will also have an earnings related component called 'additional pension').

The Government said it introduced the top-up scheme to offer fairness to those pensioners who missed out on the new flat rate state pension, by giving them the opportunity to boost their basic amount.

Top-up works by swapping a cash lump sum in return for a bigger state pension of up to £25/week for the rest of your life. Basically, you're paying money to get more money in your pension.

This income is inflation-linked in line with the Consumer Prices Index. To get the boost you have to buy a new class of national insurance called 'Class 3A'.

The top-up scheme closed on 5 April 2017

State Pension Top-Up

The scheme opened on 12 October 2015 and closes on 5 April 2017. So you need to act fast if you want to take advantage.

If it's for you (more on this below), you can choose to top-up your state pension by between £1 - £25/wk. How much you’ll need to pay to top-up depends on:

  • How much extra pension you want to get each week

  • How old you are when you make the contribution - the cost falls as your age increases so someone aged 75 will pay less than someone aged 65 (the reason is simply because you're less likely to live for as long)

For those who haven't contributed yet, if you apply between today and 5 April, you’ll have 30 days to make your payment from the day HMRC sends your payment pack.

How do I apply?

You can apply online or call 0345 600 4270. Make sure you have your national insurance number with you, as you'll be asked some questions to check your identity.

If applying online you have until 11.59pm on 5 April while phone lines will close at 8pm on 5 April. Full contact details can be found on the Government State Pension Top-Up site.

After you've applied you'll be sent a form through the post explaining how you can pay, including making a direct payment, paying in-branch at your bank or the Post Office.

Quick question

What happens if I change my mind?

What does it cost to top up?

You can choose to top-up your state pension by between £1 and £25 per week. How much you’ll need to pay to top-up depends on:

  • How much extra pension you want to get each week

  • How old you are when you make the contribution - the cost falls as your age increases so someone aged 75 will pay less than someone aged 65 (the reason is simply because you're less likely to live for as long)

To find out exactly how much it will cost you, use the Government's state pension top-up calculator. Below is a table which show some examples of how much you have to pay in accordance with how old you are:

Age and amount you have to pay

Age at contribution date

One-off amount to get an extra £1 per week
62 (women only) £956
65 £890
70 £779
75 £674
80 £544
85 £394
Note: Figures from Gov.uk

To work out what you'll pay, multiply the cost per £1 by the number of extra pounds you want per week...

Example 1: Say you turned 70 in January 2017. You decide you want to get an extra £5 per week (£260 a year) on top of your state pension. The cost of an extra £1 per week for a 70-year-old is £779, so you multiply £779 by five.

TOTAL COST: £3,895 to get £5 extra a week for life for a 70-year-old.

Example 2: Let's look at another example for someone who is five years older, but wants the same amount. You turned 75 in January 2017. The cost of an extra £1 per week for a 75-year-old is £674, so you multiply £674 by five.

TOTAL COST: £3,370 to get £5 extra a week for life for a 75-year-old.

Should I be doing it?

Unfortunately, there’s no straightforward answer. When you play out various scenarios it’s clear who this scheme is likely to benefit (although it's important to point out that doesn't mean they will!), so we'll look at those first.

Then we'll talk you through who it's worse for before looking at some practical examples to help you make a decision. For a quicker briefing read Martin's three minute 'should you do it?' guide.

Who's it better for?

This is the tricky one. When you play out various scenarios it’s very clear who this scheme is likely to benefit (although it's important to point out that it doesn't mean they will!), so we'll look at those first.

Lower-rate taxpayers (non or basic-rate) as less is eaten up as tax.

Those in good health and with a family history of longevity as you're likely to get more from it.

If you’re married or in a civil partnership as your spouse can inherit some of it if you die.

Who's it worse for

Who this is worse for is actually just the opposite to who it’s best for. But so there’s no confusion if you’re not sure whether you should go for it, let’s break it down to who is less likely to benefit from the scheme…

Higher-rate and top-rate taxpayers as more is eaten up as tax.

Those in poor health or with a family history of not living for long as you're likely to get less from it.

If you’re single as when you die the payments die.

Those who can buy NI years to boost their pension as you'd be much better off doing that.

How long do I have to live before I break even?

Just because this may be better for you than worse, that still doesn't mean you should necessarily do it.

What it boils down to is whether you’re in good health or you have a family history of long health, as it will ONLY pay off if you live long enough for the weekly top-up to at least equal the cash lump sum you first paid for it. And of course, if you want to take out an annuity - if that's the case - the top-up scheme is by far the better option.

It doesn't matter how much you top up with, you will still have to live for as long to break even.

Here's a table to give you a feel for how long it will take for you to benefit from the new top-up scheme:

Find out how long you'll have to live before you break even

Non taxpayer

Basic-rate taxpayer

Higher-rate taxpayer

Woman 62 (life expectancy 85)

80 85 93
Man 65 (life expectancy 83) 82 86 94

Woman 65 (life expectancy 86)

82 86 94
Man 75 (life expectancy 86) 88 91 97

Woman 75 (life expectancy 88)

88 91 97
Man 85 (life expectancy 91) 93 95 98
Woman 85 (life expectancy 92) 93 95 98
Note: Average life expectancy is from ONS 2013-2015 Life Tables published 29 Sep 2016.

Assumes constant tax rates and no change in tax rates or bands. Figures do not take inflation into account.

So for example, for a 65-year-old wanting to contribute to get £1 extra a week, it would cost £890. If they wanted to get the max of £25 extra a week this would cost £22,250.

As £25 extra a week is £1,300 a year, we can calculate that it would take 17 years just for them to break even. So it's only when they turn 82 that they'd start to make a 'return' on their original lump sum investment. But that's BEFORE taking the tax into account.

So in reality, you'll have to live even longer to break even. If the 65-year-old is a basic-rate taxpayer (which most pensioners are) it means he'd actually need to live to 86. With the average life expectancy for a man aged 65 being 83, the odds he'll make his money back and then profit aren't great (not taking inflation into account).

If you’re unsure about any of this and whether it’s good for you, the Department for Work and Pensions (DWP) is suggesting people seek financial advice. Getting independent financial advice will cost you, for full info and an idea of costs see our Financial Advisers guide.

A final thought...

Before making a decision it's always worth bearing in mind the following...

This is better than getting a standard annuity

What happens to your top-up if you die?

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