A plan to boost state pensions is being heralded as “an incredibly good deal” by pension analysts.
Individuals who missed out on years of earning will be able to buy up to six years of voluntary National Insurance contributions at a cost of £400 per year. For £2,400 they will be able to increase their state pension by as much as £960 a year.
The deal is part of a campaign to make state pensions fairer for those who have missed years of contribution as a result of caring for children or relatives and will be of most benefit to women.
Advisers say the government’s plan is a far more competitive option than the equivalent annuity purchase. With the same money, a 60-year-old woman would be able to purchase an inflation-linked annuity worth around £108, according to Ian Naismith, head of pensions market development at Scottish Widows.
Laith Khalaf, pensions analyst at Hargreaves Lansdown, pointed out that the guarantee of a higher state pension was likely to be more attractive in the current climate of falling private pension funds
The deal is not open to everyone. Individuals must have 20 qualifying years on their National Insurance record and reach state pension age (60 for women and 65 for men) between April 6 2008 and April 5 2015. Women who paid the “married woman’s stamp” will also not be able to take advantage of the offer, said Mike Warburton, senior tax partner at Grant Thornton.
In 2010, the working years needed to qualify for a full state pension will be reduced from 39 to 30.