State Pension Top Up: Class 3A Voluntary National Insurance Contributions


Who is likely to be affected?
Existing pensioners and those who reach State Pension age before the 6th April 2016.

General description of the measure
This measure is designed to allow pensioners and those reaching State Pension age before the 6th April 2016, the opportunity to increase their additional State Pension, by paying Class 3A voluntary National Insurance contributions. Class 3A contributions have been set at an actuarially fair rate that ensures an equitable deal for both individual contributors and taxpayers.

This measure will allow existing pensioners and those reaching State Pension age before the 6th April 2016, to acquire additional State Pension, by making Class 3A National Insurance contributions. This measure is aimed at women and other groups who have done less favourably under the existing State Pension rules and have not previously been able to top up their additional State Pension. It will provide an opportunity for pensioners to improve their retirement income by obtaining inflation-proofed extra additional State Pension.

The State Pension Top Up was announced in the Autumn Statement by the Chancellor of the Exchequer on the 5th December 2013.

Detailed proposal
The opportunity to pay Class 3A contributions will be available to those eligible from the 12th October 2015 to the 5th April 2017.

Current law
Legislation allows for the payment of voluntary Class 3 contributions for basic State Pension andBereavement Benefit purposes. There is a time limit for paying Class 3 voluntary contributions of six years after the tax year that they relate to, although this has been extended in certain cases. Married women who paid married women’s reduced rate contributions are not able to pay Class 3 contributions for those periods.

Proposed revisions
The Pensions Act 2014 introduced Class 3A contributions and set two entitlement conditions:
Contributors must have entitlement to a UK State Pension.
Must reach State Pension age before the 6th April 2016.

The Minister for Pensions in a Written Ministerial Statement, announced further details of the measure including:
The amount of Class 3A contributions (which reduces with age), specifying the level of additional State Pension that one unit of Class 3A will result in at £1 per week.
Setting a £25 a week maximum additional State Pension that can be obtained through payment of Class 3A contributions.
Providing for a cooling off period of 90 days from payment, during which a refund can be obtained, applying also to the estate of a person who dies during that period.

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