Pensioners will be able to increase their state pension by up to £25 a week from 12 October 2015, thanks to a new government top-up scheme.
In exchange for a one-off payment, known as ‘Class 3A national insurance contributions’, participants can buy an increased state pension that rises in line with inflation.
How to buy yourself a better state pension from 9 October
Feed Copy:
Pensioners will be able to increase their state pension by up to £25 a week from 12 October 2015, thanks to a new government top-up scheme. In exchange for a one-off payment, known as ‘Class 3A national insurance contributions’, participants can buy an increased state pension that rises in line with inflation. The cost depends on the age of the individual. A 65-year-old buying the maximum £25 a week would pay a lump sum of £22,250. That may sound a lot, but it’s much better value than you can currently get from an annuity. You’d have to pay £35,215 to get the same amount with inflation protection from a private pension. Tom McPhail, head of retirement policy at Hargreaves Lansdown, says: “No private pension company can offer such an attractive deal; so if you are eligible and you want to buy yourself some inflation-linked guaranteed income for life, with death benefits for your spouse thrown in too, then this is the scheme for you.” Who qualifies? The deal is only available for 18 months to people retiring before 6 April 2016. It’s on offer to appease those who won’t feel the benefit of the new state pension, which arrives in April 2016 and is generally seen as more generous. Is it worth it? A 65-year-old buying the full £25 a week allowance would receive all their £22,250 back after 17.3 years, in real terms. A 65-year-old man can typically expect to live for another 183 years, and a 65-year-old women will on average live for another 20.9 years, based on the latest figures from the ONS. So the average person should be better-off by around £1,300 for men and £4,680 for women. Moreover, £25 a week is certainly better than that available in the annuity market, but pensioners who don’t receive the full state pension because of their work history are eligible for an even better deal. You’ll get the maximum state pension if you’ve made 30 years worth of National Insurance contributions, but if you’ve got less than this you can buy additional years to fill the gaps. You’ll pay £733.20 for each year you buy, which gets you £3.86 or £200 a year. That’s equivalent to an annuity rate of 27%, and it is inflation protected. McPhail adds: “Anyone looking at buying some additional state pension should make sure they have filled in any gaps in their standard record using the Class 3 scheme before looking at the Class 3A additional pension top-up scheme.”
Source Moneywise http://ift.tt/1Msf42W
ليست هناك تعليقات:
إرسال تعليق