Money Matters Margaret Dibben

Margaret Dibben: Money Matters

Older people can, briefly, buy themselves a bigger state pension on what many believe are favourable terms, but the take-up has been low. I think I know why.

The state pension top-up scheme is available to men born before 6th April 1951 and women before 6th April 1953. You must be eligible for the UK state pension, even if this is already a full pension. The idea is to compensate anyone who is too old for the improved flat-rate state pension that started last April. But it is compensation you have to pay for.

The Government expected 265,000 people to jump at the chance of a higher income but Department for Work and Pensions figures show that in the first six months of the scheme, only 4,000 people signed up.

The offer has been available for a year and will come to an end next April. So if you do want to boost your pension this way, you should start planning now, though it is not a decision to rush into. In exchange for a one-off lump sum payment you can buy between an extra £1 and £25 a week for the rest of your life, inflation-proofed and safe. Like all pensions, the top-up payment is taxable and so a better deal for non-taxpayers. And it includes a fifty per cent pension for a spouse when you die, so it could be a useful inheritance for someone with a much younger husband or wife.

To work out whether it is worthwhile, you need to take a view on how long you