Changes to your State Pension

IN-Accountancy Self-Assessment Tax Return Deadline

From 6th April 2016 a new flat rate State Pension will be introduced for everyone, which is expected to be around ยฃ150 a week, depending on your National Insurance contribution record.

Why is it changing?

The government wants to introduce a simpler, fairer and more transparent system than the existing pension structure so the individuals have a clearer idea of how much the will be entitled to, and therefore are more able to plan for their retirement.

What are the main changes?

  • Current basic and additional pensions will be replaced by a single-tier, flat-rate State Pension.
  • The level will be set in Autumn 2015 and worth more than the standard amount.
    • To qualify for the full single-tier State Pension you will need at least 35 years National Insurance (NI) contributions or credits.
    • To qualify for any new State Pension you will need at least 10 years of contributions.
    • Those with between 10 and 34 years of contributions will receive a proportion of the pension.
  • The State Pension age will increase from 66 to 67 between April 2026 and April 2028
  • There will be a provision for 5-yearly reviews of the State Pension age.
  • โ€˜Contracting outโ€™ will end for people in defined benefit occupational schemes.
  • It will be an individual entitlement, so in general there will be no special rules for people who are married or in civil partnerships, bereaved or divorced.
  • Pension Credit and other means-tested benefits will continue to provide a safety net, but the savings credit element of Pension Credit will be abolished.
  • The proposals are intended to be cost neutral every year โ€“ meaning that overall spending on State Pensions will not increase โ€“ so there will be winners and losers as compared to the current system.

Who will be impacted?

The new single-tier pension will only affect people reaching State Pension age from 6 April 2016 onwards.

  • women born on or after 6 April 1953
  • men born on or after 6 April 1951.

It’s the date that you reach State Pension age that’s important – not when you start to claim your pension. However, you may be able to make top-ups.

If you are due to reach State Pension age in the first 5 years of the new system, you can ask for an estimate of your new State Pension.

While ยฃ150 a week may not seem a lot to live on please note that with a 5% annuity rate you would need a fund of over ยฃ155,000 to generate such an income.

If you would like to review your options regarding your retirement planning on a confidential basis, any of the team at our sister company CullenWealthย would be happy to discuss this with you on a no obligation basis.

Let’s start a conversationย 

    Subscribe me for updates and news from In Accountancy

    Related articles

    Find out how we can help?

    Lectus scelerisque a donec tincidunt litora per eleifend eget ut sagittis conubia pharetra scelerisque dui ultricies duis parturient auctor adipiscing.

    ย 

    Let’s start a conversationย 

      Subscribe me for updates and news from In Accountancy

      IN-ACCOUNTANCY

      Search
      IN-Accountancy
      Privacy Overview

      This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.