Voluntary Contributions to Your Pension

The full amount of state pension is currently £155.65 a week for those retiring after 5 April 2016, and it is generally an improvement over the old basic state pension.

You must have made 35 qualifying years of national insurance contributions but there is a big catch. If you have been in ‘contracted out’ employment, you will have been paying a reduced rate of contribution and this will result in a deduction from the full pension. For anyone who keeps working until state retirement age, any further qualifying years beyond the required 35 will help rectify the situation.

However, there is also an attractive option for those retiring early, especially public sector employees retiring at 60. The idea is that you can pay voluntary class 3 contributions for each of the five or six years between retirement and reaching state pension age (65 or 66), reducing the amount of deduction. The current cost for each year of voluntary contributions may seem high at £733, but this could add £231 a year to your pension – not a bad return if you live well into your eighties or nineties.


You might decide to keep working on a self-employed basis after retiring, and currently you can obtain further qualifying years by paying class 2 contributions of just £146 a year. Class 2 contributions will be abolished from April 2018, with pension entitlement then coming from class 4 contributions.

Unfortunately, the new state pension is not paid to those who retired before 6 April 2016. Such pensioners have been given the chance to top up their pension entitlement by up to £25 a week, but the take up has so far been way below government expectations. If you wish to purchase a top-up, you only have until 5 April 2017 to do so. The extra income is for life and is inflation proofed; in most cases, your surviving spouse or civil partner will inherit between 50% and 100% of the income following your death.

Advice is essential, but in general terms, a top-up is worthwhile if you are in good health, do not pay tax at higher rates and have a younger partner who will inherit when you die. It is not quite so attractive for single people, although women have the advantage of a longer life expectancy – top-up rates are gender-neutral.