This would also reduce your overall taxable income for the year, potentially enabling you to avoid the child benefit tax charge (see above). For a 75-year-old looking to buy an extra £1, £5 or £25 of pension a week, the lump sum payments required would be a fair bit lower: £674, £3,370 and £16,850 respectively. Normally you’ll pay a regular sum into your pension each month. e-mail; 18. shares. A DWP spokesman says: “We have been clear that many people stand to benefit from topping up their state pension, and those who do will receive guaranteed payments for life, which in many cases can be inherited by spouses or civil partners. As of Monday, existing pensioners and those who will reach retirement age before 6 April 2016, and who are entitled to the state pension, can boost their future payments by up to £25 per week, by making an upfront lump sum payment. Once you have coughed up, your higher pension amount will be payable from that date. The government is running a scheme whereby older people can buy extra state pension on what experts say are “very favourable” terms – but the take-up so far has been shockingly low. The “top-up” scheme is designed to help those who will already have retired before that date, and would otherwise miss out. Any unused allowance from the previous three tax years can be ‘rolled over’ to the current year. Some may feel that spending hundreds of pounds now to get, say, an extra £1 of pension a week isn’t worth the hassle. How long is this scheme running for? How much will it cost me? Once you start to access your pension, your annual allowance reduces to just £4,000 (from £40,000). However, the cost falls as your age increases, so it may make sense to wait until your next birthday before making the payment. So if you paid £20,000 a year into pensions for the past three years, then this year you could contribute a total of £100,000 (this year’s £40,000 plus £60,000 carried over). The Government has launched a new scheme offering anyone reaching State Pension Age before 6 April 2016, the chance to buy additional State Pension and increase their retirement income by up to £25 a week. But data provided by the Department for Work and Pensions (DWP) in response to a freedom of information request by Old Mutual Wealth shows that just 3,848 people took advantage of the scheme during its first six months. To get the maximum extra £25 a week (£1,300 a year) of state pension, someone aged 65 would need to pay more than £21,000. It may also affect any income-related benefits you receive now or in future. The average amount of extra pension bought was £21 per week at a typical cost of £16,500. From next Monday, anyone who has or will have passed retirement age by April 6 2016 will be given the opportunity to increase the amount of state pension they get every week by between £1 and £25. Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Here’s an explanation of how it works and a summary of the pros and cons. We have all the details here, Last modified on Wed 29 Nov 2017 09.30 GMT. What do the experts think? Jon Greer, a pensions expert at the firm, suggests that many of those who bought an annuity during the past few months would have been better-off going down the top-up route. One big advantage of this scheme is that it provides an index-linked return – what you get will increase in line with the consumer price index. Because the deal is the same for males and females, it’s likely to be particularly attractive to women, who typically live longer. The government is shifting everyone towards a new, more generous state pension, worth at least £151.25 per week, ... there is an 18-month window to apply for a pension top-up. For some, a product such as an Isa may be a better bet. The more prosaic answer is that many older people do not have a sizeable lump sum they can use to buy extra state pension. State pension top-up is taxable as income, so check how much you would receive after tax. Everyone has an annual allowance which the maximum payable into pensions in any given tax year (currently £40,000). That depends on the applicant’s age, and how big a top-up they want to purchase – from £1 a week to £25. You can access your pension pot in a number of ways from the age of 55. This steadily growing portfolio of investments is known as a pension pot. To get the maximum extra £25 a week (£1,300 a year) of state pension, someone aged 65 would need to hand over £22,250. Go to gov.uk/state-pension-topup, Is this a good deal? However, you can reduce your taxable income by paying into your pension. Want your pension topped up by £25 a week? To get this extra money, you … Continue reading "The government’s new state pension top-up scheme – is it worth it?" Despite the boost to your savings if you move them into your pension, there are some disadvantages of doing this. On the face of it, that’s not a bad deal. More details, including a top-up calculator, are available online, Unlike the government’s subsidised “pensioner bonds”. As you get older, the cost comes down. How much you want extra in your pension each week depends how much you can pay in a lump sum. You will then receive a form explaining how to pay. The official prediction was that 265,000 people would take advantage of the chance to boost their retirement income by making an upfront payment. As a member of the Local Government Pension Scheme (LGPS), you have the option to pay extra pension contributions to provide for additional pension benefits when you retire. The extra pension from the top-up scheme will be paid for the rest of the pensioner’s lifetime, and may be inherited by their spouse or civil partner. If you have a lot of pension savings, a large contribution might take you over the lifetime allowance. This is the simplest reason: it’s good to store away as much money as you can in your pension, to generate as much growth as possible before you need to start drawing an income from it. This means that to put a pound in a pension you contribute 80p and the government tops up with 20p. It’s the great deal no one seems to know about. Once you reach 55, you can transfer savings into your pension knowing that you can access them again if you need to. As little as £127 and as much as £23,350, depending on how much extra pension you want, up to £25 a week. This will cost him £4,135. There’s no better way to give your savings such an instant boost. If you have gaps in your national insurance record it may be more cost-effective to make voluntary NI contributions first. State Pension top up can give pensioners an extra £1 to £25 a week in exchange for a lump sum payment. However, there are several reasons why you might want to make large one-off contributions. Although you can access your pension at any time from the age of 55, doing so reduces the amount you can pay into it. Basically, you hand over some cash and in return get an extra slice of state pension. There is a cooling-off period, so you can get a refund if you change your mind. This is called “state pension top-up”. So what’s the deal? Money paid into your pension qualifies for tax relief, which has the effect of boosting it by 25 per cent (or more if you pay higher rate tax). To find out your life expectancy, go to visual.ons.gov.uk/how-long-will-my-pension-need-to-last/. It’s protected against inflation, and the top-ups can usually be inherited by your spouse or civil partner. However, you should talk to a financial adviser first to ensure you are making the best decision. You can maximise your private pension in the years before you retire by making extra contributions to it. This means that in the short term they can fluctuate a great deal. This means that if your estate may be subject to IHT, you can reduce it by making additional payments into your pension, and still pass on the money in the event of your death. The top-ups may also be unsuitable for people who are in poorer health or have a lower life expectancy. How do I find out how much I could get? In basic terms, someone aged 65 who pays £890 now to receive an extra £52 a year would need to live for more than 17 years – beyond 82 – for the deal to work in their favour. It … Make sure you consider these before making any decisions. You can apply online at gov.uk/statepensiontopup, or by phone (0345 600 4270). In technical terms, the government has created a new class of voluntary national insurance contributions, Class 3A, and those eligible are being invited to top up their “additional state pension” (the extra amount you get with your basic state pension that is made up of the state second pension and its predecessor, Serps) via this new class of contributions. This makes your pension a very powerful way to maximise your retirement savings.

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