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[UK pensions] buying a "top up"

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[UK pensions] buying a "top up" Empty [UK pensions] buying a "top up"

Post by pete_l Thu Apr 03, 2014 3:07 pm

A quick note to say that there's an article in the Telegraph which reports that pensioners will be able to pay for increases in their weekly pensions, from October 2015 for 18 months.
The basic idea is that you can pay a one-off fee of £890 and for that you get an extra £1 per week ... for ever. There's a limit (presumably per person?) of getting an extra £25 / week - which will cost you £22,250. However that increase is a much better RoI than other forms of saving.

Here's the link: [You must be registered and logged in to see this link.]


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[UK pensions] buying a "top up" Empty Re: [UK pensions] buying a "top up"

Post by Tim Cullis Fri Apr 04, 2014 6:54 am

Thanks for the link.  

For someone born in 1951 you would need to pay £9130 in October 2015 in order to get an additional £10 pw but it doesn't say when this additional benefit would start—presumably when aged 65, i.e. 2016?  

If that's the case, then at first sight the person would need to live 18 years (until 83 years old) to start to win out (and that's without taking loss of interest into account).  The government reckons the actuarial rates used are fair for both the pensioner and the exchequer, but like everything of this sort it's a gamble.  

The top-up rates are the same for men and women, so it's a better bet for women with their generally longer life terms.  However it's also increased in line with prices and inheritable on death in the same way as existing additional State Pension, with a minimum of 50% for the surviving spouse which makes it more interesting.  

The official term for this scheme is Class 3A Voluntary National Insurance Contributions.  If anyone doesn't have a right to a full state pension then there's another (existing) top-up scheme called Class 3 Voluntary National Insurance contributions which should be explored first.
Tim Cullis
Tim Cullis

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