The New State Pension comes into force from 6 April 2016 and new UK pensioners will find a number of differences, with some pensioners gaining from the changes, while others will lose out.
What is the New State Pension 2016?
The new pension applies to everybody reaching pensionable age on or after 6 April and amounts to a maximum total benefit of £155.65 each week. Amounts of pension due are based on National Insurance records and pensioners will need a minimum of ten years payments in order to qualify for the minimum payments.
The new maximum pension is higher than the existing maximum rate of £115.95 weekly, however, you need at least 35 years of qualifying National Insurance contributions to achieve payments at this level. You could still qualify for the maximum pension if National Insurance credits were allocated at times during your life, for example if you were a carer, unemployed or parent with childcare responsibilities.
Does Everyone Qualify for the New State Pension?
The UK Government has failed to highlight just how many changes have been put in place and how they will affect new retirees and people who are approaching retirement age. An MPs enquiry is currently underway to investigate reasons the government failed to communicate all the forthcoming changes in a comprehensive manner to the public.
Reviews of the new regulations have already highlighted that only about 37 percent of retirees in 2016/17 are likely to qualify for the full rate of payment, as anybody who contracted out of the State Pension Scheme to join employment schemes will be unable to receive full payments. If you don’t qualify for the maximum payment, payments made into vocational schemes should ensure you won’t lose out financially.
Who Are the Winners and Losers Under the New Pension Scheme?
The major losers under the new scheme will be higher earners who won’t qualify for such generous state pension. It is felt likely that these pensioners would usually have built up substantial vocational pension and/or savings to mitigate any losses, however.
Winners under the new scheme are likely to be women who may only have partial National Insurance contribution records, alongside substantial credits due to carer responsibilities. Additionally, self employed people who have run their own businesses are likely to have access to higher payments. The total benefit to women and the self employed under the new regulations is likely to amount to around £40 per week, so it’s a genuine increase for some people retiring from April 2016 onwards.
What Can You Do to Improve Your Life At Retirement?
Increased likelihood of living longer has also meant reforms to the retirement age. From the year 2020 pensionable age goes up to 66 for men and women, and increases to 68 by the year 2046.
If you’re nearing retirement age now, it may be disappointing to consider you could have to work until the age of 66 and it’s important to find out what your state pension is likely to amount to. It’s possible to receive an accurate state pension forecast if you’re over the age of 55, and this will give you indicators of any additional savings or investments you need to put in place.
There are a number of resource available to help you understand all the potential pension and saving options. However this information is often generic and should not be taken as advice. In order to make the best decision about your financial future it is recommended that you seek professional pension advice from an experienced adviser. They will be able to help you put together a savings plan that fits your needs.
Maxim Wealth Management have been helping clients across the UK find their perfect saving vehicle since 2001. If you are interested in financial advice please contact us today for a free consultation: Glasgow 0141 764 0040 or London 0207 112 8654.