The government is expected to release details on how much it will cost for pensioners to top up their existing state pension in the 2014 Budget, taking place on 19 March.
In 2016, the current state pension will be changing – the government will be introducing a new ‘single-tier’ state pension, replacing the current combination of basic state pension and additional state pension.
This new single-tier will be higher than the current state pension, at £147.62 per week in today’s money. But only those who claim state pension from 2016 onwards will get this single-tier pension.
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State pension boost for existing pensioners
Existing pensioners look set lose out under the new state pension rules. However, in the 2013 Autumn statement, the Chancellor George Osborne announced that they would be able to purchase more state pension to top up the amount that they already claim.
To do this, they need to make voluntary Class 3A National insurance contributions. Mr Osborne is expected to reveal the cost of doing this in the 2014 Budget.
It will be possible to boost your state pension by a maximum of £25 a week, but the expected price will vary with age – the older you are, the cheaper it will be.
Go further: National Insurance explained – get to grips with how much you pay
Increase in current state pension to be confirmed
In 2010, the coalition government introduced a new system of state pension increases. The so-called ‘triple-lock’ system guarantees that, every year, the basic state pension will rise in line with earnings, inflation (measured by the Consumer Prices Index, CPI) or 2.5% – whichever is the greater.
The 2013 Autumn Statement announced that the basic state pension would increase by 2.7% in April 2014, in line with the increase in the CPI to September 2013.
The government is expected to confirm again that the basic state pension will increase to £113.10.
Go further: State pension explained – find out more about what you’re entitled to
Other changes to the state pension
The single-tier pension is accompanied by further changes – a 35 year qualifying period for full entitlement (replacing the current 30 years) and an increase in state pension age for women to 65 by 2018.
State pension age will rise again to 66 for both men and women by 2020 and 67 by 2028. A further rise to 68 is envisaged by the mid-2030s and 69 by the late 2040s.