The government has unveiled more details of a scheme to allow people to top up their state pensions, if they reach pension age before the new £144 a week flat rate pension kicks in in 2016. Those reaching pension age before then will be able to buy up to £25 a week in extra pension. The new information today is on how much the added pension will cost. A 65 year-old man or woman will have to pay £890 to secure an extra £1 a week in pension. The maximum £25 top-up will cost £22,250. A 75 year-old would pay £674 for an extra pound. The scheme, available from October next year, could be of particular help to women and the self-employed, who are more likely to have incomplete National Insurance records, so lower pensions. The government has designed the top-up so it does not create an extra burden on the taxpayer. However, pension experts say the terms are more attractive than annuity rates currently available to pensioners. The state pension is now £110.15 a week. The new flat rate pension is pencilled in at £144 in current prices, likely to be over £150 a week when it starts in April, 2016.
"Pensioners and those who reach pension age in the next 2 years will be able to acquire up to £25 of additional State Pension a week under plans set out today (2 April 2014) by the Pensions Minister.
The State Pension top up will be available from October 2015 to all those reaching State Pension age before 6 April 2016.
The scheme will allow people the opportunity to get inflation-proofed additional State Pension by making Class 3A Voluntary National Insurance contributions.
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 £1 of pension a week will be £890, whereas for a 75-year-old the contribution rate for the same amount of pension is £674.
A calculator is available online which illustrates the contribution rates based on age and how much people wish to increase their additional pension by at www.gov.uk/state-pension-topup"