Voluntary Class 3A NICs to Boost Pensions
Under the guise of voluntary National Insurance Contributions (NICs) class 3A, the government is planning to offer current and soon-to-be pensioners a way to top-up their Additional State Pension by as much as £1,300 a year.
Announced by George Osborne in the Autumn Statement 2013, this scheme has been introduced ostensibly for the benefit of women who took career breaks earlier in life to raise a family, but also those who work or have worked for themselves. According to the Department of Work and Pensions: ‘Class 3A will give pensioners an option to top up their pension in a way that will protect them from inflation and offer protection to surviving spouses.In particular, it could help women, and those who have been self-employed, who tend to have low Additional Pension entitlement.’
However, the scheme will not open until October 2015 and will only be available to pensioners who reach State Pension age before the introduction of the new single tier pension scheme in April 2016. Men over the age of 101 and women older than 96 will not be able to contribute to the scheme because they reached retirement before April 6 1979.
A detailed design of the scheme has not yet been formulated so it is currently unclear how much people will have to pay, but those who meet the criteria will be able to buy between £1 and £25 a week in extra additional state pension. The move has been described as a “neutral policy” by pensions minister Steve Webb who said: ‘This is a neutral policy, it is not a bung or a revenue raiser. I would say first of all buy back what you can through the subsidised route and then buy [top ups through the new scheme].’ The 3A class NICs will not be subsidised.
Those who have gaps in their national insurance record (i.e. they haven’t made 30 years’ worth of contributions) can already make voluntary contributions to top up their pensions under certain conditions.