You’ve probably been hearing about a new scheme which the government is bringing into effect which offers millions of people the chance to earn a higher income during their retirement by topping up their state pension.
Although this scheme may look and sound attractive to many people, is it really going to offer the best way to get more from your pension in the long run?
Here at Burton and Fisher, we offer independent financial planning in Lancaster, and with pensions playing a huge part in many people’s finances, we think it’s important that people understand what this scheme means for them and their money. Join us as we take a closer look at the state pension top up scheme and find out if it is really all that beneficial to opt in.
Who Is Eligible for the Scheme?
From the 12th October 2015, all individuals who are already receiving their state pension, or anyone who is due to receive it before 6th April 2016 is eligible to join the pension top up scheme.
Depending on your gender, you may not be eligible, even if you are the same age as your husband/wife. This means that:
- Men are eligible if they were born before 6th April 1951
- Women are eligible if they were born before 6th April 1953.
The scheme intends to compensate individuals who will not be eligible for the new state pension which will be available from April 2016.
How Much Will I Be Entitled To?
The scheme allows for some individuals to receive the maximum figure of £1,300 a year extra to their existing state pension. This works out at an extra £25 per week pay out from your state pension which is currently £115.
How much you need to pay to receive that extra will depend entirely on how old you are. For example, people who are 65 years of age will cost £22,250 as a one off payment to receive the £25 a week extra.
The government website has a top up pension calculator which can help work out how much you would need to pay.
Are There Any Other Benefits?
The extra money that you will receive will rise with inflation, making your initial one off payment seem more affordable; you will be getting more money each week without having to pay any extra.
It’s also stated that most spouses and civil partners will be able to benefit from the payments through inheritance. It is predicted that around 50-100% of your payments will be able to be transferred to them. This works the same as when passing on additional state pension.
How Long Do I Have to Apply?
The scheme is only expected to run for 18 months and will finish in April 2017. We currently have no idea as to what will come once this period has ended.
If you are thinking of opting into the top up pension scheme, but would like to discuss it with a professional financial advisor before you do, don’t hesitate to contact us here at Burton and Fisher. Call us today on 01524 416872 and our team will be more than happy to help you.