State Pension Top-Up – Time is running out

The Department of Work and Pensions (DWP) has recently issued a reminder to all those who have expressed an interest in topping up their Additional State pension by up to £25 per week. The option to make Class 3A Voluntary Contributions applies to individuals who attained their state pension age on or before 5 April 2016, i.e. individuals who receive, or will receive, their State Pension under the old rules, not the new flat rate state pension.

If this applies to you, you have until 5 April 2017 at the latest to contribute.

Is this still worth considering?
It has been possible to make voluntary National Insurance Contributions (Class 3A Voluntary NIC) since October 2015. When the Government announced the details of these earlier, they stated that the rate offered would be in line with the market.

However, even when they became available it was not possible for an individual in good health to secure a pension annuity paying the same level of income as achieved from paying Class 3A NICs.

However, since then, annuity rates have fallen.
According to the Money Advice Service website on 28 October, for an individual aged 66, to secure an income of £1,300 p.a. with a 50% spouse’s pension that is index linked would cost over £46,900.

To obtain the same level of income a Class 3 NIC would cost £21,775 based upon the DWP calculator run on the same date.

The cost of a State Pension top up is based on a person’s age and takes average life expectancy into account. For a 65-year-old, an extra £10 of pension a week will cost £8,900, whereas for a 75-year-old the contribution rate for the same amount of pension is £6,740.

In simple terms, the Government offer, which was generous when it was launched has, due to the changes in the annuity market, become very attractive.

If you have attained your SPA on or before 5 April 2016 and you have spare capital and are concerned about the low level of cash deposit interest rates, this offer is still on the table.

More information on State Pension top up and how to apply is available here. This includes an online calculator which illustrates the contribution rates based on age and the additional amount someone wishes to receive.

If you are unsure if making a voluntary contribution is suitable for you, you should obtain independent financial advice before proceeding.

But time is running out…..

The state pension is only one small aspect of a complex financial world that we all live in.

If you wish to take a step in the right direction with planning your finances, please feel to call us on 01626 833225 or email us at to find out more or to arrange an initial complimentary meeting.

Important Information
Please note that the above article does not constitute financial advice.

The views and opinions contained herein are those of Loughtons Independent Financial Advisers and may not necessarily represent views expressed or reflected in other economic communications, strategies or funds.

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