State pension top up offers an opportunity to boost retirement income.
A few facts:
- It is available from October 2015 to April 2017.
- Those who have already reached state pension age, or are reaching state pension age before 6 April 2016, can secure an index-linked top up, increasing the weekly state pension for life by paying a lump-sum contribution.
- Unlike Class 3 ‘additional voluntary contributions’, which are designed to ‘fill the gaps’ in a claimant’s national insurance record, state pension top up (also known as ‘Class 3A’ contributions) provides the opportunity for people to add more pension on top of any existing entitlement.
- Contribution rates are set on an actuarially fair basis, with the size of the lump sum required determined by the person’s age and the amount by which they wish to increase their state pension.
- In line with rules on inheriting state pension under SERPS, a spouse or civil partner may be able to inherit at least 50% of their deceased partner’s state pension top up.
The Department for Work and Pensions has highlighted that 'like any conversion of capital to income, using capital to make a state pension top up contribution can have the impact of reducing a person’s taxable estate.
Couples may wish to consider their tax status when deciding whether one or both partners make the contribution, and also their relative ages on application, as these will impact payments resulting from state pension top up.'
Guidance has been developed specifically for pensions advisers.
You can also access detailed information, an online ‘calculator’ tool and register for regular scheme updates on the State Pension top up website.