Can I top up my state pension after retirement? It seems I can do it to some extent, but I’m getting conflicting advice.
I bought the extra year DWP said I could, and it explained I could also buy earlier years – but said it wouldn’t lead to an increase in my new state pension as I was already receiving a contracted company pension.
But I’m surprised that a DWP person I spoke to said it was possible to top up to the maximum in the future, even though I’m currently receiving it. Was she wrong?
Worth the effort? There’s no reason why someone can’t top up their state pension after retirement – but it won’t always be worth it for them to do so, says Steve Webb
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Steve Webb replied: Much of the recent discussion about supplementing your state pension is about people who have not yet reached retirement age, but in principle there is no reason why you cannot supplement your pension after retirement age.
Provided that you fall under the ‘new’ AOW system and that you reach retirement age on or after 6 April 2016.
However, the process is slightly different for those already receiving a pension, and there are a few other things to consider.
The first difference is that DWP workers should call the ‘Toekomst Pensioencentrum’ to discuss their options, while those already receiving a pension should speak to the Pension Service.
I have to admit I don’t really understand why the same people can’t handle both types of calls, but that’s how the system is set up.
The second difference is that for those already receiving a pension, an increase in their national insurance record only affects their state pension payment from the moment the contributions are paid.
In other words, an increase is not retroactive to when they first retired. For people who have not yet started taking their pension, any supplement will of course benefit immediately upon retirement.
Another difference is that if you are older when you supplement your pension, you expect fewer years on average to take up your increased pension, which means that the chance that you will end up in the profit is slightly smaller.
For example, if you top up when you are seventy you are less likely to live the 3-4 years it takes to make a profit than if you top up when you are sixty six. But it is still much more likely that you will live for so many years and make a profit in general.
Do you want to top up your state pension, but you don’t know which years to buy?
Buying state pension supplements can give a huge boost to retirement income, but people often wonder if it’s worth it for them personally.
At the moment, the usual six-year deadline to do so has been extended to 2006/2007 – a special deal that was due to expire on April 5, but after a telephone outage, the deadline for buying state pension supplements was pushed back to July 31.
Here we explain how the system works and Steve Webb gives six golden rules for buying state pension supplements.
I think what may have confused you is that while there is no barrier to people supplementing retirement age, it doesn’t necessarily mean you personally benefit.
You indicate that you had a company pension and were ‘outsourced’ to part of the state pension. This means that your new AOW calculation is probably based on a 2016 starting figure that starts with the old ‘basic’ AOW pension, which has been fully contributed for 30 years or more, plus any additional AOW pension you are entitled to. had.
Paying voluntary contributions for a year prior to 2016 may be useless to you if you had already been in the system for 30 years in 2016, because having 31, or 32, or 33 does not change the ‘basic’ pension element of the calculation where you have already made the most of.
Now if you don’t have a post-2016 “gap” that you can fill (and that would add to your starting 2016 figure), then while you have pre-2016 gaps that you can still fill, you’d be wasting your money if you did did. .
Finally, I always remind people that a group that should be very wary of topping up are the ones who might otherwise get benefits when they retire. If you pay out money to increase your AOW, but your AOW credit or other benefit is reduced, you have probably lost your money.
One benefit of all this when you retire is that you now probably have a pretty good idea of whether benefits are likely to be an issue for you.
Also a reminder that after a successful campaign, the government has now extended the deadline for buying back historical missing years of national insurance contributions from April 6, 2023 to July 31, 2023.
For those who have struggled to get through over the phone, this should mean that if you leave it for a few weeks until the rush has passed, you should be able to reach the Pension Service (or Future Retirement Centre) and make an informed choice to to appreciate or not.
For those who want to know more about AOW supplements we have prepared a page on the LCP website which provides more information.
Ask Steve Webb a retirement question
Former Pensions Secretary Steve Webb is This Is Money’s Agony Uncle.
He’s ready to answer your questions whether you’re still saving, retiring or juggling your finances in retirement.
Steve left the Department of Work and Pensions following the May 2015 election. He is now a partner at actuary and consultancy firm Lane Clark & Peacock.
If you would like to ask Steve a question about pensions, please email him at email@example.com.
Steve will do his best to answer your message in a future column, but he won’t be able to reply to everyone or correspond privately with readers. Nothing in his answers constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
Please include a daytime phone number with your message – this will be kept confidential and will not be used for marketing purposes.
If Steve can’t answer your question, you can also contact MoneyHelper, a government-backed organization that provides free retirement assistance to the public. It can be found here and the number is 0800 011 3797.
Steve get a lot of questions about AOW forecasts and COPE – the Contracted Out Pension Equivalent. When you write to Steve on this topic, he’s answering a typical reader question here. It contains links to several of Steve’s previous columns on state pension projections and outsourcing, which may be helpful.
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