View the article online at http://citywire.co.uk/money/article/a757089
Homeowners could buy more state pension
Health minister Paul Burstow says pensioners should be allowed to use the equity in their homes to buy more state pension.
The government could allow pensioners to swap equity in their homes for an increased state pension.
Next year the government will allow those who are retired or retiring before April 2016, when the new flat-rate pension is introduced, to top up their state pension by making additional national insurance contributions (NIC).
They will be able to buy new class 3A ‘stamps’, as they are sometimes known, to receive up to £25 more a week. A person aged 65 will be able to buy £1 a week of extra income for £890, or £25 more a week for £22,250.
For those without a spare £20,000, minister of state for the Department of Health, Paul Burstow, said the government could look at allowing property equity to offset the cost.
Speaking at an International Longevity Centre-UK conference about the creation of a government ‘equity bank’ to help retirees release some of the value in their homes to boost their pensions, Burstow said the idea fitted alongside the plan to allow retirees to purchase more state pension.
‘In 2015 the Department for Work and Pensions will make an offer to pensioners to buy more state pension,’ he said. ‘For those who do not have enough income or spare cash to buy it, there may be some scope for [property] equity to be used…it is not too late to be built into [the] option [of buying more state pension]. It would give pensioners a way of using an asset to buy extra pension.’
Burstow said there was a gap in pension financing and using property equity was just one way to do it.
‘We need to fill the gap between what the state will fund [in retirement] and what the individual will fund to be populated by a range of products that are not there yet,’ he said.
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