Government state pension top up scheme branded a ‘failure’

1 December 2017
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A government scheme put in place to help pensioners who missed out on the new state pension top up their earnings failed to reach the number of pensioners expected to benefit, according to new figures.

Between October 2015 and 5 April 2017,  pensioners and workers approaching state pension retirement age before 6 April 2016 were given the opportunity to increase their additional state pension by buying extra state pension years with lump sum Class 3A national insurance contributions (NICs).

The policy, announced by the then Chancellor, George Osborne, in December 2013 was designed to mollify pensioners and people approaching their state pension age before 6 April 2016 when the new state pension came in. 

According to figures published by the Office for Budget Responsibility (OBR), the Treasury had expected 265,000 pensioners to opt to contribute more to top up their state pension.

However, the OBR has reported that a mere 13,000 people opted to contribute - less than 5% of the government’s estimate.

The OBR states that there were “highly uncertain assumptions” made about projected uptake of the scheme. Initially it was believed that a total of £870 million worth of NICs payments would be made. Yet only £225 million in contributions was received.

The OBR does however say that of those who did contribute, much higher amounts were paid in than had initially been assumed – an average of £17,000 compared to the estimated £3,200 per person.

A Department for Work and Pensions (DWP) spokesperson told Moneywise: “We promoted the state pension top-up through an extensive media campaign over two years which encouraged eligible people to find out more about the scheme. We were always clear that the scheme would not be suitable for everyone.”

Why did the scheme fail to reach so many people?

Kate Smith, head of pensions at financial provider Aegon comments: “The failure of this initiative looks to be down to affordability, with only the cash-rich able to top up their state pension.

“The government introduced the time-limited offer to pensioners who missed out on the higher new state pension (introduced in April 2015), to boost their pension. The full basic state pension is currently £122.30 a week while the full new state pension is £159.55, leaving quite a gap to bridge.

“Just 13,000 people, only 5% of the projected 265,000, chose to pay a lump sum and top-up their pension by between £1 to £25 per week. Payments were dependent on age, with younger pensioners having to pay more for each extra £1 of state pension, as they will on average live longer, so receive guaranteed payments for longer. 

“On the other hand, the average payment was £17,000, which was five times the amount predicted by the government raising 25% of its forecast. It’s likely that more younger, healthier pensioners took up the offer as they will benefit the most.

“Although offering value for money this initiative has failed to capture the imagination of UK pensioners.” 

Comments

In reply to by anonymous_stub (not verified)

I have been a pensioner for nearly 2 years I have 35 years of stamps to get full state pension is it worth topping up more stamps to get more state pension I would like to no your views people

In reply to by anonymous_stub (not verified)

Can't understand why we had to pay into the system for 50 years to receive our old state pension when the ones receiving the much higher new state pension only need to contribute for 35 years. Wonder what the younger ones think about this being fair. We even had to pay into additional state pension which not completely a bad thing but meant we were being forced to pay the extra to try and get our pension above Guaranteed Pension Credits level so we could not claim, unlike those who never paid in any credits who get their pension made up to £159.35 weekly plus loads of other benefits they get because they are on GPC's, this can make them better off than those who paid full credits as they end up with same pension level but no extra benefits. Who said it pays to work, must have been one of the none working scroungers.

In reply to by anonymous_stub (not verified)

considered this but would have been charged HR tax so I would only keep 60% of the extra and I would have forfeited the capital downpayment. Chose to invest the capital on the stockmarket instead albeit more risky but at least I still have the capital.

In reply to by anonymous_stub (not verified)

If you were still working or had another source of income, e.g. a company pension, deferment was a more cost effective option to increase your pension, especially for those born before April 1951.

In reply to by anonymous_stub (not verified)

Not surprising it failed with the only jobs on offer being temporary, zero contracts and no training for jobs of a permanent position available.

In reply to by anonymous_stub (not verified)

It’s not a matter of capturing the imagination it’s more to do with having the money to be able to top up your state pension.

In reply to by anonymous_stub (not verified)

I am 68 on the 26/12/2017 and I have paid in to the state pension since the early 1960s, but when i contacted them before I was 65 they said that they only got records from 1975 onwards so I loose out about 11 years, plus I was on income support and housing benefit from 1974 until 2004 but they say there is no record of me living there from 1997 until 2002 I have been living at the same address for over 22 years as a sitting tenant so I have lost another 5 years so they say I have only got 25 years not 30 years.so if there is any one that could help out there please contact me many thanks

In reply to by anonymous_stub (not verified)

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In reply to by anonymous_stub (not verified)

I am disappointed in my lower state pension when they moved the goal posts because I was born before the 5th April 2016 I got the lower rate pension scale what really upsets me is i paid 44yrs of contributions and get less pension plus the new pension rules get more pension money for only 35 yrs contributions the government can legally steal off pensioners and get away with it I just think it's shocking my rate at the moment is £128 and the new rate is £159 a difference of £31 how does this government justify this gap and raising the age of people's state pension and a lot of people mite not reach that age

In reply to by anonymous_stub (not verified)

I would have to live to nearly 90 to recoup my top up estimate I am 69 at the moment and I am missing out on £160.00 per month on the new pension I feel gutted because somebody 4 years younger will receive £160.00 per month more and possibly paid less contributions , as you say in your page this top us was for the wealthy hence the higher contributions received

In reply to by anonymous_stub (not verified)

I am 75 now and all I get pension is about 12 pence a week I didn't work full time so didn't pay national insurance

In reply to by anonymous_stub (not verified)

It doesn't same fair that my state pension was based on 44 years of National Insurance,and that the relatively new system was based on fewer years, and the pension for these people is far more than people like me.

In reply to by anonymous_stub (not verified)

I considered this option very carefully and concluded that I could not afford to pay out the amount of cash that would have made any real difference to my pension.

In reply to by anonymous_stub (not verified)

Sir, I retired in December 2004' why was I not given the opportunity to increase my pension? I did pay up the shortfall I had bringing my pension up to the maximum at the time and with some other small contributions I now get approximately £125 per week. Why was I not allowed to increase it to the current higher paid pension ??? Thank you

In reply to by anonymous_stub (not verified)

Only thing I enjoyed about the budget was he never penalised owners of diesel cars which were purchased due to encouragement from the Labour goverment, with their tunnel vision poor knowledge they could only see a reduction in CO2 emissions, any penalty should come from cheating car manufacturers and MP's pension funds. He did right thing in only putting increase on buyers of new diesels, plenty of warning for you to study other fuels. I would have prefered it to have been charged against manufacturers as a tax they should pay on every diesel produced instead of just the owners.

In reply to by anonymous_stub (not verified)

I am 76. I did not hear of the opportunity to pay in extra money to augment my State pension. Can I still do that and what are the parameters?

In reply to by anonymous_stub (not verified)

I took early retirement at 55. Although my state pension doesn´t get paid until 2026, I had only 31 years contributions and (two years back) a mail to say essentially that everything was okay for a full pension. However, when they changed the requirement to 35 years, it was let for me to find out myself and arrange to pay the extra.I suspect that many soon to be pensioners were really aware of the true details, possibly thinking that they were all set up.

In reply to by anonymous_stub (not verified)

I am 72yrs. I worked and paid a full stamp until my children were born. I never left my family until both at school. I worked parttime for nhs and was told dont pay full cos you dont earnvenough. I now couldnt get my own state pension and had to claim a very low amount off my husbands stamps. In 90s they sent me a statement telling me if I paid 4000 I would get badic state. I couldnt afford it. Im still feeling let down about this when I looked after the family but I know foreigners who claim full.I live in fear of not having enough to live on so we are selling up and making sure I have enough because my husband is very poorly now with Parkinsons.

In reply to by anonymous_stub (not verified)

Why would anyone feel they should have to pay all that extra to try and bridge the gap for those born before 1950....women who had already paid in for 39 years and men for 44 years? Did the government REALLY feel this was generous offer??

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