Chance for retirees to boost pension
Published on 27 January 2014 02:30 PM
Older people are to be given the chance to boost their state pension by up to £25 a week under a new scheme.
The plan, which was originally announced at the Autumn Statement, is to let anyone who has already reached state pension age, or those who will do so by April 2016, pay an amount in the region of £900 to £25,000 to top up their retirement income for the rest of their lives.
Pensions minister Steve Webb expects the scheme to be particularly attractive to women, who tend to live longer and so will get a better return on their contributions, as well as the self-employed, who currently only qualify for the basic state pension.
Those that take up the offer will see their weekly state pension increase by around £1 for every £900 paid in, although the precise return will be decided at a later date and will be calculated depending on an individual's age.
Scheme aimed at woman pensioners
For example, the return would be significantly greater for a person in their mid-70s who is not expected to live as long as someone just approaching pension age.
'Many older people have been getting a very poor return on their savings in recent years,' said Mr Webb.
'This scheme will give them a guaranteed, index-linked return and will be particularly attractive for women pensioners who will draw the higher pension for longer.'
Although the final figures have yet to be finalised, the scheme will be formally launched in a matter of weeks and will remain open for a limited period of time such as 18 months.
It is aimed at those reaching pension age before the new higher flat rate state pension of around £146 a week on today's terms a week is introduced on April 6, 2016.
The maximum top-up is expected to be set at between £20,000 and £25,000, meaning someone paying in this amount would earn an index-linked boost of £25 a week for life.
That equates to an extra £1,300 a year - so a person living 30 years beyond pension age would gain £39,000.
Copyright Press Association 2014