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'Top-up' scheme allows pensioners to boost retirement income
A new “top-up” state pension scheme launching on Monday will allow hundreds of thousands of people to boost their retirement income by up to £25 a week in exchange for a one-off, upfront payment.
The measure is part of the transition to the new, more generous state pension being introduced by the Department for Work and Pensions in April 2016, which will be worth more than £150 a week.
From Monday, existing pensioners, and those who are approaching retirement who will miss out on the higher state pension, will be able to pay to boost their incomes by up to £25 a week for the rest of their lives, uprated annually in line with inflation.
Men aged 65 or older, and women aged 63 or older, will be eligible. The older they are, the less they will have to pay in exchange for an income boost.
“Top up is an opportunity for people already retired, or reaching state pension age before April 2016, to boost their later life income,” said pensions minister Baroness Altmann. “It won’t be right for everybody and it’s important to seek guidance or advice to check if it’s the right option for you.”
She added that the top up scheme, which is effectively a one-off boost to national insurance contributions, might particularly appeal to those people who have not accumulated full state pension rights through their working lives. One example would include women who gave up work to raise their children.
“It could be particularly attractive for those who haven’t had the chance to build significant amounts of state pension, particularly many women and people who have been self-employed,” she said. The extra payments will also be inheritable by the pensioner’s spouse or civil partner.
Whether the new scheme is worthwhile for each individual will depend on how much longer they live after making the payment.
When the details of the scheme were first announced last year, by Altmann’s LibDem predecessor Steve Webb, pressure group the National Pensioners Convention (NPC) said that for someone aged 65, who would have to pay £890 to receive an extra £52 a year, it would take more than 17 years before they start to gain from the deal.
“A 65-year-old will have to weigh up the likelihood of living beyond 82 to decide whether or not this new scheme will give them any benefit. For some it will, but the latest figures from the Office for National Statistics show that average life expectancy for men is 79 and for women, 82. Given this, the top-up scheme looks like a bit of a gamble,” the NPC said.
The government has made protecting pensioners’ incomes a key plank of its tax and benefits policies, with the value of the state pension protected by a “triple lock”. That means it is guaranteed to rise each year in line with either inflation, earnings, or 2.5% – depending on which is highest at the time the increase is set.
Universal benefits such as free bus passes and free television licences for the over-75s have also been maintained, as promised by the prime minister, despite deep cuts in other areas of public spending.
But the private pensions landscape has changed radically, with George Osborne using last year’s budget to announce a dramatic extension of pensioners’ freedoms to access their retirement fund, and removing the obligation to buy an annuity.
http://www.theguardian.com/money/201...irement-income
A new “top-up” state pension scheme launching on Monday will allow hundreds of thousands of people to boost their retirement income by up to £25 a week in exchange for a one-off, upfront payment.
The measure is part of the transition to the new, more generous state pension being introduced by the Department for Work and Pensions in April 2016, which will be worth more than £150 a week.
From Monday, existing pensioners, and those who are approaching retirement who will miss out on the higher state pension, will be able to pay to boost their incomes by up to £25 a week for the rest of their lives, uprated annually in line with inflation.
Men aged 65 or older, and women aged 63 or older, will be eligible. The older they are, the less they will have to pay in exchange for an income boost.
“Top up is an opportunity for people already retired, or reaching state pension age before April 2016, to boost their later life income,” said pensions minister Baroness Altmann. “It won’t be right for everybody and it’s important to seek guidance or advice to check if it’s the right option for you.”
She added that the top up scheme, which is effectively a one-off boost to national insurance contributions, might particularly appeal to those people who have not accumulated full state pension rights through their working lives. One example would include women who gave up work to raise their children.
“It could be particularly attractive for those who haven’t had the chance to build significant amounts of state pension, particularly many women and people who have been self-employed,” she said. The extra payments will also be inheritable by the pensioner’s spouse or civil partner.
Whether the new scheme is worthwhile for each individual will depend on how much longer they live after making the payment.
When the details of the scheme were first announced last year, by Altmann’s LibDem predecessor Steve Webb, pressure group the National Pensioners Convention (NPC) said that for someone aged 65, who would have to pay £890 to receive an extra £52 a year, it would take more than 17 years before they start to gain from the deal.
“A 65-year-old will have to weigh up the likelihood of living beyond 82 to decide whether or not this new scheme will give them any benefit. For some it will, but the latest figures from the Office for National Statistics show that average life expectancy for men is 79 and for women, 82. Given this, the top-up scheme looks like a bit of a gamble,” the NPC said.
The government has made protecting pensioners’ incomes a key plank of its tax and benefits policies, with the value of the state pension protected by a “triple lock”. That means it is guaranteed to rise each year in line with either inflation, earnings, or 2.5% – depending on which is highest at the time the increase is set.
Universal benefits such as free bus passes and free television licences for the over-75s have also been maintained, as promised by the prime minister, despite deep cuts in other areas of public spending.
But the private pensions landscape has changed radically, with George Osborne using last year’s budget to announce a dramatic extension of pensioners’ freedoms to access their retirement fund, and removing the obligation to buy an annuity.
http://www.theguardian.com/money/201...irement-income
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