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Contractors can now Top Up State Pensions

From October 12th, the new state pension ‘top up’ scheme from government is now allowing more than 7 million Britons the option to top up their state pensions up to £1,300 extra per year. Anyone who reaches state pension age before April 6th 2016 will be eligible as well as existing pensioners for a further […]

By Laura Nixon on 20 Oct 2015
Read time: 2 minutes

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From October 12th, the new state pension ‘top up’ scheme from government is now allowing more than 7 million Britons the option to top up their state pensions up to £1,300 extra per year.

Anyone who reaches state pension age before April 6th 2016 will be eligible as well as existing pensioners for a further guaranteed income of up to £25 a week, in exchange for a one-off payment.

It is thought that around 265,000 people are likely to peruse this government scheme and is most sought after by the self-employed. Reports state that the self-employed could treble their income compared to a savings bond. For example pay in around £10,000 and you’ll get an extra £11 on your pay out – or £572 a year before tax. Though, if you put the same sum in an average savings bond at 1.8 per cent, pay out would only be £180 per year before tax.

Any additional payments made by pensioners will be guaranteed for life and will also have the ability to be inherited by surviving partners of at least half of the additional pension, only once their partner reaches state pension age. The pay out for the top up scheme is inflation proofed, meaning that it will rise in line with the consumer price index (CPI).

However, anyone who will reach state pension age after April 6th and feel they have missed out by only a few months, will have the option to boost their own state pay out with the new higher flat rate pension. This scheme is open to women born before April 6th 1953 and men born before April 6th 1951 and will run for 18 months; due to finish in April 2017.

A spokesman from DWP stated that there will be an information pack sent out to those who have signed up for the top up scheme later in the year. However, it is probably more beneficial for you to speak to an accountant regarding your pension as there are different contributing factors which could influence your decision.

If you would like to appoint an accountant or see how Nixon Williams’ New Business team can help please call us on 01253 362062 or email craig.whelan@nixonwilliams.com

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