Between now and April 2017, men and women about to reach pensionable age have the chance to pay a lump sum to bump up their state pension by up to £25 a week.

The new Pension Freedom rules were brought in by the government earlier this year as many people no longer consider pension annuities (the income you get from selling your pension pot) to be good value for money.

Chartered financial planner Kevin Forbes, chairman of the Hampshire and Dorset Personal Finance Society and a partner at Strategic Solutions Chartered Financial Planners, explains the new rules:

Who does it apply to?

This scheme only applies to men born before April 6, 1951, and women born before April 6, 1953 and the payment has to be made before April 2017. 

And it doesn’t make any difference whether you have a full state pension or not. Your age is the only thing that matters. 

What is it then?

You can exchange a lump sum of your cash - how much depends on your age - for extra state pension income for life, from a minimum of £1 to a maximum of £25 per week.

A woman born in 1950, for example, would need to pay a lump sum of £22,250 between now and her 66th birthday or £21,750 once she reached 66 to get an extra £25 weekly payment.

Why was it introduced?

It was partly because the government acknowledged what many people had recently experienced firsthand - that pension annuities (the income you get from selling your pension pot) were no longer deemed good value for money.

However, reaction has been generally good to the scheme, with many industry experts pointing out that this is effectively a very cheap annuity.

So should I do it?

This is the sixty four thousand dollar question. It depends mostly on one thing, how long are you (and maybe your spouse) going to live, but also on your tax status, health, risk appetite and a few other factors.

This really is a case for personalised advice from a regulated independent financial adviser, however, it may be wise to know some more beforehand.

The real question is do you need that annuity? Does it represent good value for your money? Well, not for most people.

How does it work?

The money you use to buy extra state pension will be money that has already been taxed when you originally earned it and now could be taxed again when it is paid out as an extra income - depending on your personal circumstances.

So, for a 65-year-old male paying for the full £25 extra a week it would take 17 years for the state to return the money (£22,250/£1,300) if a non tax payer, based on life expectancy statistics.

Therefore they would get all their original cash back by around age 82.

A basic rate tax payer however will only get £1,040 of the £1300 (after 20 per cent tax), taking more than 21 years to get the capital back.

These examples ignore the fact that the pension will rise with inflation and any lost interest on the lump sum.

So the big winners from this scheme could be those not paying any tax in retirement, those who live a long time past the average life expectancy, or who have a spouse that does (and keeps picking up the 50 per cent that is passed on at death).

The big losers: those in poorer health, single people or those who die before the national average age.

If only we knew which one we would be, it would make this a lot easier to recommend.

What happens if I do it and then change my mind?

There's a 90-day cooling-off period, during which you'll get a full refund if you change your mind. The money is also refunded to your estate should die within 90 days of topping up. 

What else should I be considering?

If you invest into an individual savings account (NISA) you do so out of already taxed income (i.e. from your take home pay).

The capital and income are then untaxed while they grow and stay untaxed when you take the cash out to spend it.

Pensions generally work the other way round.

The money goes in free of income tax (i.e. from your gross pay before tax is calculated), grows tax-free, but is then taxed when it is withdrawn (after the tax free lump sum).

It is also worth considering that if you haven’t already got 30 years of National Insurance contributions, you may be able to pay to fill in the gaps.

Each year costs you around £700 and then pays you about £200 a year. That’s a far quicker payback.

Do I need to decide soon?

If you do decide this is for you, you only have between October 12 this year and April 5, 2017, to act.

What should I do?

If you want to know precisely what your own top-up would cost you can check using the Government’s own calculator here.

You can find an independent financial adviser here. Always check they are listed on the Financial Conduct Authority website as a regulated adviser. This can be found here.