Topping up your State Pension

Welcome to the Chairman’s Blog which is a new feature that is being introduced to the ABAP website.

Last week my attention was drawn to the possibility that there is a significant cohort of people in the country (around half a million, it was suggested) who have yet to start drawing their New State Pension who may be able to top up their State Pension and achieve a significant rate of return in so doing - 30% was the rate quoted in the radio programme.

The 8th October edition of Money Box Live (starting at 8 minutes 08 seconds), which is available on BBC iPlayer, promotes the Royal London Guide which explains how it is done: http://www.royallondon.com/Global/documents/GoodWithYourMoney/TOPPING-UP-YOUR-STATE-PENSION-GUIDE.pdf

The pensioner used in the example is David Hoddle who is a BA pensioner who apparently missed out on his full flat rate state pension thanks to our pensions being "contracted out" for a substantial part of our employment. There must be many other BA pensioners who have yet to draw their state pension who may benefit from reading the guide.

I published this information on my Mike’s List last week and there has already been an encouraging response. One beneficiary who also has a wife affected in the same way studied the Royal London paper which he described as “very clear”. His reading of it was that he and his wife could only pay extra National Insurance contributions from April 2016 to August 2016 and November 2016 respectively. However, he reports that he rang the DWP helpline on 0300 200 3500 and he was told by the advisor that both of them could in fact pay in for 6 years each, at a rate of roughly £690 per year (it is £733 in the Royal London example, but that is for the latest year) and each year gets them a further 1/35 each of the New State Pension. This is roughly the same as the Royal London example. The 6/35 extra SP gets them each £26.46 per week extra state pension, up from roughly £122 to £148 (near the NSP of £155.65). The payback is (before tax) about 3.2 years.

If this seems to good to be true, it may be. But can I encourage anybody who might be able to benefit to read the Royal London paper and to ring the DWP on 0300 200 3500? There is nothing to lose and potentially a lot to gain. Please let me know how you get on via chair@abaponline.org