From 12 October 2015, eligible individuals will be able to begin topping up their state pension by up to £25 per week.
The lump sum payments, known as ‘class 3A voluntary contributions’, can be made up until 5 April 2017 by those that are entitled to a basic state pension before 6 April 2016. For men this means those who were born before 6 April 1951, while for women the relevant date of birth is before 6 April 1953.
An example of how pension top ups will work:
A 68 year old individual decides to put an extra £5 a week into their pension, which equates to £260 a year. Because the cost of an adding an extra £1 for a 68 year old would be £827, the individual must multiply £827 by 5. The lump sum payment here is £4,135.
The reason for the introduction of the pension top up option is that the new state pension system which starts in April 2016 is expected to provide a more generous income than the current system.