Pension Changes – How the State Modifications to Pension Rules Could Affect You
On 6th April this year, a number of changes were introduced by the Dept of work & pensions targeted at helping women, carers and small earners in retirement, but it was not great news for every person.
One of the most profound alterations is the inflated minimum age for drawing a retirement income. From 6th April, the minimum pension age was uplifted to age 55, affecting more than 4 million individuals who were born between the sixth April ninteeen fifty five & 5th April nineteen sixty who will now have to hold back for up to five yr to get their retirement pension.
The state pension age for adult females also began to increase from 6th April until it reaches sixty five in two thousand and twenty. By twenty twenty six, it is set to increase to sixty six for everyone, until it in the end reaches 68 in twenty forty six.
Additional modifications include a reduction in the Nat.l Insurance (NI) contributions required to qualify for the full basic state pension, which increased from £95.25 a wk to £97.65 a week from the 6th April. Men & adult females will now need to build up just 30 yrs of contributions, which the government anticipates will set aside for an extra forty thousand women who reach pension age in the next tax yr to provide entitlement for the max state pension.
The state second pension will also be affected by the changes & now payments within the upper earnings threshold have been reduced from 20% to 10 %. At some point, this will be moved to a flat rate payment rather than an earnings-related pension, and will continue to be related to inflation, not wages.
A different credits scheme replaces the Home Responsibilities Protection (HRP) scheme, which is designed to help parents & carers to qualify for the government pension. From the 6 April, qualifying years can now be built up by weekly credits. These can then be added on to any paid contributions made when at work, with no limit on the credits awarded, as long as the qualifying rules are met.
For those reaching state pension age after this shift takes place, each complete year of HRP, up to a maximum of 22 years, will be converted into qualifying years for the basic state pension.
Consilium Asset Management provide retirement planningadvice to clients in the South West of England
