Changes to the State Retirement Age
With the Government’s seemingly endless tinkering with the State Retirement Age it is easy to lose track of when you can expect to receive your State Pension. We have moved a long way from the days when men retired at 65 and women at 60.
The following is a summary of where we are at and what further changes the Government is proposing to make to the State Pension Age (SPA).
These were introduced in the Pensions Acts of 2007 and 2011 and were designed to increase the SRA for women to 65 and then to 66 and 68 for both men and women.
|2010 to 2018
||April 1950 to December 1953
||SPA increases gradually to 65
|2018 to 2020
||Men & Women
||December 1953 to April 1968
||SPA increases to age 66
|2044 to 2046
||Men & Women
||SPA increases to age 68
The Pensions Bill 2013 proposes to make further changes which are likely to be made law by the end of the year. This introduces a SRA of 67.
|2026 to 2028
||Men & Women
||SPA increases to age 67
Confused – well you’re probably not alone. Enter your details in the following website www.gov.uk/calculate-state-pension to get your expected SRA under the current rules but remember that it could well change again if the last few years are anything to go by. In fact, the Government has stated that the SRA will be reviewed every five years with the next review taking place in 2017.
Don’t forget that in addition to the above, the Government will be replacing the current two tier State pension that is comprised of the basic state pension and second state pension (S2P – previously SERPS) with a flat rate pension from April 2016 paying a maximum of around £144 a week in today’s money if you have made National Insurance Contributions for a minimum of 35 years.
Found this from Legal & General and it explains the new state pension scheme, I hope it helps and if you have any questions just ask. Mark
Long awaited details of the new state pensions system designed to simplify the current complicated system have been unveiled. The most momentous overhaul of the state pensions system in the last 50 years is outlined in a 108-page White Paper. These are the key points of the proposals.
AMOUNT OF PENSION
From April 2017, a new single weekly flat rate of £144 (in today’s money) for all pensioners (the actual figure will rise to take account of inflation) will replace the current system. The tiers of the graduated, basic state and the state second pension will be merged into one, and the means testing complexity of Pensions Credit will be abolished. The single tier will increase in line with the average growth in earnings.
To qualify for the full amount, individual will require 35 qualifying years of national insurance contributions/credits (increased from the current level of 30 years). After 35 years, no further benefits will accrue. Importantly, nobody will be entitled to a penny until they’ve amassed at least 7 to 10 qualifying years. And those accruing fewer than 35 years but above the minimum number of qualifying years will receive a pro-rated amount.
The focus will be on individual qualification – being able to inherit or receive rights from a spouse or civil partner will cease. Deferral of the single-tier pension will be permitted in return for an increased weekly rate, but the ability to take the deferred payment as a lump sum will stop.
There’ll be a sharp cut-off point – the new pension won’t be available to those 11 million people who have already reached their state pension age by April 2017.
The proposals also confirm that the state pension age will be increased from 66 by 2020, then to 67 between April 2026 and April 2028. Due to increasing longevity, the age will be reviewed every 5 years.
Scrapping the state second pension signals an end to defined benefit (DB) contracting out. The downside is that 7 million members (figures issued in the White Paper) of DB schemes (most of these are in the public sector) will face a hike of 1.4% in their National Insurance (NI) contributions. Furthermore, employers sponsoring such schemes will pay an extra 3.4% NI, and this cost increase is likely to accelerate the closure of DB schemes.
Due to the inherent complexity of the current state system, transitional measures will address the issues of state pension benefits accrued prior to the implementation of the single tier pension.
WHO WILL BENEFIT?
Knitting together the diverse components that make up state pension provision won’t be straightforward – there’ll undoubtedly be winners and losers. Those who will particularly benefit will be women who have taken time off to care for children; low earners; and the self employed who currently are entitled to only a full basic state pension (currently £107.45 a week). The new system will be detrimental to those older employees with long-term membership of SERPS/State Second Pension.
Despite these new proposals having some flaws, these changes should be embraced positively as individuals will understand their state pension entitlement and will be in a far better position to prepare for their retirement and plug any shortfalls with private pension provision. At a time when auto-enrolment is being rolled out across the workforce, and individuals are being encouraged to make additional provision for their retirement, abolishing means testing creates far more of an incentive to save.
Pensions Technical Analyst
Technical Solutions Team
The BBC reported today (September 19) that the number of people actively paying into a workplace pension scheme dropped for the third year running in 2011. The statistics came from the Office for National Statistics and the fall from a dip in membership in the private sector.
A new policy however will be put in place in October that will automatically enrol workers into a scheme unless they opt out. It is hoped that this will encourage more people to save for old age.
Pensions are regularly in the press and discussed in Government making them a prominent issue. For help and advice regarding your pension scheme you can contact Mark Bugden or visit www.review-my-pensions.co.uk .
Worth reading if you are a higher rate tax payer but it could mean you need to do a tax return! – Mark
Author: Jenna Towler
IFAonline | 20 Jul 2012 | 07:00
Categories: Pensions – Retail| Tax Planning
Topics: Prudential| Higher rate taxpayers
More than half higher rate taxpayers are failing to claim full 40% tax relief on their pension contributions, research commissioned by Prudential has found.
The provider said this works out to more than 290,000 employees, missing out on almost £300m every year.
The research also found fewer than one in five (19%) higher rate taxpayers knew whether they had claimed tax relief or not, while only 22% said they did claim all the pension tax relief they were entitled to.
It added, this relief could be worth an additional £1,020 every year to a higher rate taxpayer.
According to HM Revenue & Customs, 55% of the estimated 900,000 higher rate taxpayers in the UK contribute to defined contribute (DC) schemes.
Prudential said these workers bring home an average salary of £51,580 and make contributions of £425 each month.
Basic rate 20% tax relief is received automatically at source and is worth £85 on a monthly contribution of £425. But the additional 20% relief available for higher rate taxpayers – which is unclaimed by most – is worth another £85 a month or £1,020 every year.
Prudential is urging higher rate taxpayers to act now to claim tax relief that they may have missed out on in previous years. People who are required to complete an annual tax return can claim for their pension contributions from the 2010/11 tax year if they act before the end of January 2013.
Those who don’t need to do a tax return can claim for relief for as far back as the 2008/09 if they act before the end of October 2012.
Members of occupational pension schemes receive basic and higher rate tax relief automatically through their payroll.
But members of personal pension schemes, including group personal pension schemes (GPPs), self-invested personal pensions (SIPPs) and stakeholder pensions, only receive basic rate 20% tax relief automatically.
They need to claim the additional relief through their annual tax return or by informing HMRC.
Matthew Stephens, Prudential’s tax expert, said: “It’s astonishing that so many people fail to claim this valuable tax relief, which could help enormously in meeting the cost of retirement. Surely no one would knowingly turn their nose up at a potential £1,020 extra tax saving?
“The good news is that it’s possible to claim backdated tax relief, for up to three years for those who don’t need to complete a tax return, and this money could make a large extra contribution towards their pension fund. Our research figures demonstrate clearly that a majority of higher rate taxpayers could take immediate steps towards boosting their retirement pot.”
About a third of higher rate taxpayers who contribute to a personal pension have to fill in an annual tax return.