The Department for Work and Pensions has unveiled the pricing plan for its top-up scheme to allow pensioners to boost their state pension entitlement by up to £25 a week.
In the Autumn Statement, the Chancellor said people will be allowed to make Class 3A voluntary national insurance contributions to boost their state pension.
Top-ups can be made for 18 months from October 2015.
The new rules mean someone aged 65 will get an extra £1 of state pension a week for every £890 they give to the Treasury.
The rate improves the older you are so 70 year olds will pay £779 to get £1 back while 75 year olds will pay £674 for every extra £1.
The top-ups, available up to a maximum of £25 extra per week, can be inherited, with a surviving spouse or civil partner entitled to at least 50 per cent of the additional state pension.
Speaking at a Reform conference in London today, pensions minister Steve Webb said he expects the scheme to be popular and the Treasury has allocated up to £900m worth of revenue.
He said: “It is a pretty good deal. I can feel a career in financial services sales coming along. These are not advised sales and other options are available.”
Hargreaves Lansdown head of corporate research Laith Khalaf says: “This top-up scheme looks pretty generous compared to buying an annuity from an insurance company.
“It is an olive branch from the Government to those who retire before the new single tier state pension is introduced in 2016.
“The scheme offers pensioners another option for putting their savings to work, which will be particularly welcome given today’s low interest rates on cash held in the bank.”