Pensioners will be able to buy top-ups of as much as £25 in extra state pension per week from autumn next year under Government plans.
The state pension top-up will allow people to boost their pension by paying a new class of voluntary national insurance contributions called "class 3A" (see our State Pensions guide to make the most out of retirement).
The scheme will be available from 12 October 2015 to 1 April 2017 to all those who have reached state pension age by April 2016, including existing pensioners, and the cost of the top-up will be based on someone's age and average life expectancy.
The plans mean that for a 65-year-old man, for example, an extra £1 of pension per week will cost £890, but for a 75-year-old the contribution rate for the same amount of pension would be a lower amount of £674.
The top-ups can also be inherited, with a surviving spouse or civil partner entitled to at least 50% of the additional state pension.
The Government estimates around 265,000 people may take up the offer, based on research carried out earlier this year to gauge possible interest in the scheme.
More information about the new top-up scheme can be found on Gov.uk where a personal calculator has been set up for people to work out the contribution needed to increase their pension by a weekly amount.
People can also register their interest for the scheme by calling 0845 600 4270 or 0345 600 4270.
More help for pensioners
The new measure follows the unveiling in the recent Budget of plans for a Pensioner Bond, to be made available from National Savings and Investments from 2015 (see our Pensioner Bonds coming for over-65s MSE News story).
It also follows a stream of Government announcements in recent weeks which will lead to people having greater freedom over how they cash in their pension savings later in life, some of which have already come into force (see the Radical reforms to give greater access to pensions savings MSE News story).
Outlining the plans, pensions minister Steve Webb says: "The scheme will give pensioners a guaranteed, index-linked return and will be particularly attractive for women pensioners who will draw the higher pension for longer.
"It will also help the self-employed, who currently qualify for only the basic state pension."
ISAs may be a 'better' option for some
However, one pensions expert warns that an ISA may be a better option for some. Laith Khalaf, head of corporate research at financial services provider Hargreaves Lansdown, says: "This top-up scheme looks pretty generous compared to buying an annuity from an insurance company.
"It is an olive branch from the Government to those who retire before the new single tier state pension is introduced in 2016.
"The scheme offers pensioners another option for putting their savings to work, which will be particularly welcome given today's low interest rates on cash held in the bank. For some, the secure inflation-linked income will be attractive.
"However the income is taxable, which means some savers should pause to consider whether an ISA may be a better, more flexible home for their money."