Interactive Investor

Pension top up options

Find out how to top up your pension and maximise your retirement income. 

You can boost your retirement income by topping up your pension. There are various options available depending on the type of pensions you hold. 

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How to top up workplace and personal pensions 

You can boost your workplace or personal pension by increasing your contributions. This could be in the form of a lump sum or by increasing your regular contributions. 

Any contributions you make receive a substantial boost from tax relief. Tax relief adds 20% to your contribution. Higher-rate taxpayers can claim back additional tax on their self-assessment tax return.

Should I top up my workplace pension or my personal pension?

Workplace pensions enable you to benefit from both personal and employer contributions. 

Alternatively, you could choose to contribute to a personal pension, such as a SIPP, to boost your retirement income. SIPPs allow you to manage your own investments and pension pot. They also tend to offer a far wider range of investment options. 

However, you should only choose to open a SIPP if you are comfortable managing your own investments. It is also comes with risk as your investments could go down as well as up. 

Be aware of savings limits

Each year you can contribute 100% of your salary, up to a maximum of £60,000 gross, to your pensions. If you exceed your annual allowance, you may face additional charges. 

Final salary pensions top up

You cannot increase your contributions to top up a salary-based defined benefit pension. Instead, extra savings need to be made into an additional voluntary contribution ( AVC) plan. 

Contributing to an AVC plan could enable you to bring forward your retirement, but that is likely to be very expensive. Alternatively, your AVC plan could be used for saving towards an additional source of retirement income. 

State pension top up options

A full state pension is currently £221.20 a week (£11,502 a year). To qualify for the full state pension, you must have made 35 years’ worth of national insurance (NI) contributions. 

If you have made fewer than 35 years’ worth of NI contributions, your weekly state pension is calculated proportionally. Each year you have made NI contributions adds roughly £5 to your weekly pension. 

There are two ways you can potentially increase your state pension. 

Voluntary national insurance contributions

You can make voluntary national insurance contributions to fill in some of the gaps if you have made fewer than 35 years of NI contributions. This costs about £17.50 a week or around £910 if you pay as lump sum.

Each year you pay for adds roughly £5 to your weekly pension (over £250 a year). Most people can pay for up to six years of additional NI contributions. 
You cannot top up your state pension if you are already due to receive the full £221.20 a week.

Delaying your state pension

You can boost the amount of state pension you eventually receive if you delay taking it. 

Every nine weeks you delay taking your state pension adds 1% to the amount you eventually receive. If you delay for a year, it adds just under 5.8% - taking your weekly pension up to just over £234 a week (assuming no annual increase in the State Pension). 

Pension top up FAQs