REVEALED: How to grab hidden £237 a year state pension boost

AN ESTIMATED one million early retirees could boost their state pension for a knockdown price.

Investing just £741 this year could buy an extra £237 a year income for life. What’s more, that income is guaranteed to rise every year in line with prices, wages or 2.5 pc — whichever is higher.

It’s equivalent to getting an annual return of 30 pc a year — that’s 12 times more than you could get from an annuity, which turns your private pension pot into a guaranteed lifetime income.

The returns make it tempting for those with small private pensions, or spare savings earning very little interest, to cash in and buy more governmentguaranteed state pension.

Anyone who is under state pension age, retired and is projected to receive a state pension of less than £159.55 per week could potentially benefit.

The opportunity comes from a wrinkle in the complex transition arrangements from the old to the new state pension.

The Government looks at how much old basic state pension has been earned. This may be up to £122.30 per week for those with 30 years or more of National Insurance credits up to April 5, 2016.

It then adds extra pension from top- up schemes such as state earnings-related pension or state second pension (S2P). If the total is less than the £159.55 per week rate of the new state pension, it is possible to continue building it up.

Each year’s credit under the new regime is worth £ 4.55 a week on your pension. Those in work or on certain benefits usually get credits automatically.

But those who have retired and are under the current state pension age can buy them for £14.25 per week under a scheme that’s known as Class 3 NI.

It could benefit anyone who has spent a lot of their career contributing to a salary-linked pension and was taken out of the state top-up pensions by their employer.

This may include police, firefighters, nurses, teachers, members of the armed forces, air traffic controllers, civil servants and bank workers, as well as many others who worked for firms which at one time offered final salary pensions.

Some will have been members of pension schemes which allowed — and in some cases forced — retirement at the age of 55 or 60.

For example, a teacher who retires at 60 but is not due to receive their state pension until they reach the age of 66 could buy an extra £1,422 per year state pension for a contribution of £4,446, based on current rates.

Steve Webb, director of policy at Royal London, who served as pensions minister in the Coalition government from 2010 to 2015, estimates that a million people could benefit.

You are allowed to go back up to six years to fill gaps in your National Insurance record but the key date is April 6, 2016, when the new state pension was introduced.

Any back payments for years before that will not boost your state pension unless you have less than the full 30 years needed to get the maximum basic state pension under the old regime.

However, you could buy yourself an extra year’s pension immediately by paying Class 3 to cover the last tax year, which ended on April 5, 2017.

This six-year rule also means that, technically, there is no need to pay the Class 3 immediately. You could instead save and invest your money elsewhere and then pay in the full amount as a lump sum.

But that £4,446 in a building society might only earn around £300 over six years.

And Mr Webb warns: ‘ The Government could shut down this scheme with very little notice. ‘Given how little you could earn on the money in a savings account and the chances of forgetting, on balance it is probably better to do it straight away on a yearby-year basis.’

Before plunging in, check how a bigger state pension might affect any other benefits to which you are entitled, particularly if you expect to receive pension credit. And make sure you are not entitled to free National Insurance credits.

This may be the case if you are on certain benefits such as Jobseeker’s Allowance, Unemployability Supplement, which is, for example, payable with Industrial Injuries benefits, Employment and Support Allowance, or Statutory Sick Pay.

If you care for someone — such as an elderly parent or grandchildren — for more than 20 hours a week, then you may well be entitled to Carer’s Credit.

Men who are aged 63-and-a-half or over also get free credits, although this limit is rising in line with the women’s state pension age.

Mr Webb has recently updated a free guide to Topping Up Your State Pension, which is available on the Royal London website, royallondon.com.

There is also information on how you can obtain your state pension statement, pay Class 3 NI and decide whether you are entitled to any free credits at