After the recent announcement of a new ‘state pension top-up’ scheme, many are in a predicament when it comes to taking part or not.
It is now possible for pensioners to top up their state pension, which could mean receiving an extra £25 per week. This particular offer will be available to anyone who reaches the state pension age by April 2016. However, there will only be a short window in which to take part in the scheme and those wishing to do so must act quickly. The new system will run from 12 October 2015 up until 1 April 2017.
The scheme has been put in place in order to offer fairness to the 12 million individuals who are expected to miss out on the new flat-rate state pension, which will entitle retirees to a weekly sum of £155 from April 2016.
For those wishing to take part in the new top-up scheme, an online calculator is now available at gov.uk/state-pension-topup. Every extra £1 per week will cost a 65-year old around £890 in total, whilst the maximum top-up of £25 will set back those wishing to take part a total of £22,250. The payouts are also said to be linked to inflation, which means they are expected to increase every year.
One of the major benefits of such a scheme is the inheritance option. The government will entitle a surviving civil partner or spouse to at least 50% of their partners top-up on their death.
Financial advisors have stated that such a scheme is extremely generous and as such, is being described as good value for money. However, it could prove costly to couples that require access to a lump sum and also, to those who pay a higher rate of tax. Anyone needing financial aid at any stage in their lifetime could consider a small loan for bad credit, provided that appropriate repayments could be made.
The top-up system is certainly worth considering, especially as individuals must hold at least 30 years of National Insurance in order to claim the full basic state pension, which comes in at around just £113.10 per week. For some, this may not be enough to live out a comfortable lifestyle, especially with rising living costs and house prices to consider.