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Pensions

Pension reforms start in April

Caxton House SignAn increase in the state pension rate is among a number of welfare reforms to come into effect throughout April 2018.

2 April

Funeral expenses payment

For people on qualifying benefits, Funeral Expenses Payments contribute towards the cost of arranging a funeral. From 2 April, it has been made simpler for people to claim a Funeral Expenses Payment. Changes include extending the period in which a claim can be made and allowing recipients to receive contributions from friends and family without them being deducted from the payment.

6 April

Automatic enrolment into a workplace pension

To help workers to save for their future, the automatic enrolment pension contribution rates also increased from 2% to 5% on 6 April 2018.

Automatic enrolment was created to help people with their long-term pension savings and works by requiring employers to enrol all eligible staff into a workplace pension. An estimated 10 million people will be newly saving or saving more later this year and the increase in minimum contribution rates will build on this success.

9 April

State pension

The State Pension has also increased from 9 April, in line with the ‘triple lock'. The full basic State Pension was put up by 3% to £125.95 a week. This means that the government will have raised the full basic State Pension by £1,450 a year since 2010. The full rate of the new State Pension also increased by 3%, to £164.35 a week.

‘State Pension top up’ scheme starts 12 October 2015

State Pension Top Up BannerFrom 12 October 2015, a new scheme is being launched helping anyone reaching State Pension age before 6 April 2016 to safeguard their long-term financial security.

Men aged 65 or older and women aged 63 or older are being offered a chance to increase their State Pension by up to £25 a week, giving them guaranteed extra income for life.

The scheme will remain open for 18 months and those who think they can benefit will be able to buy additional State Pension – worth up to £1,300 a year. In most cases, surviving spouses and civil partners will be able to inherit at least 50% of the extra pension.

This is an opportunity for people to increase their guaranteed retirement income for the years ahead with a boost which will be index-linked, helping to protect pensioners and their spouse or civil partner from inflation.

Minister for Pensions, Baroness Altmann said:

This government’s commitment is to provide security for working people at every stage of their lives, and that includes giving people the chance to enjoy a financially secure retirement. We have already committed to protecting pensioner incomes with the triple lock – uprating the basic State Pension by at least 2.5% each year of this Parliament. The new State Pension, coming in from April 2016, will ensure a simpler, more sustainable State Pension for the pensioners of tomorrow.

Top up is an opportunity for people already retired, or reaching State Pension age before April 2016, to boost their later life income. It won’t be right for everybody and it’s important to seek guidance or advice to check if it’s the right option for you. But it could be particularly attractive for those who haven’t had the chance to build significant amounts of State Pension, particularly many women and people who have been self-employed.

With the scheme launching tomorrow, anyone who thinks they might benefit should seek advice and can visit our online calculator and find out more.

The cost of a State Pension top up is based on a person’s age and takes average life expectancy into account. For a 65-year-old, an extra £10 of pension a week will cost £8,900, whereas for a 75-year-old the contribution rate for the same amount of pension is £6,740.

More information on State Pension top up and how to apply is available at www.gov.uk/statepensiontopup. This includes an online calculator which illustrates the contribution rates based on age and the additional amount someone wishes to receive.

Millions of pensioners protected with Winter Fuel Payments

Caxton House SignThe benefit helped ensure pensioners were able to stay warm during the coldest spells of last winter, with a one-off payment of between £100 and £300 to help towards the cost of heating their homes.

The government’s commitment to protect the elderly by maintaining universal pensioner benefits means that nearly 9 million households were helped by the scheme, with 6.7 million women and 5.7 million men benefiting. In total, more than £2.1 billion was paid out.

Work and Pensions Secretary, Iain Duncan Smith MP, said:

Winter can be hard for older people, particularly those who are vulnerable, and they should have the confidence to turn up the heating when they need to, safe in the knowledge that they will be able to afford to pay the bill.

Winter Fuel Payments give people this peace of mind and remain central to our one nation commitment of a compassionate society which puts economic security at its heart.

On top of Winter Fuel Payments, around 2 million households also receive help each year through the Warm Home Discount scheme. This year’s payment is giving more than 1.3 million of the poorest pensioners an extra £140 off their energy bill.

The government also provides Cold Weather Payments of £25 a week, giving an additional layer of support for vulnerable people in low-income groups during the very coldest snaps.

As well as UK recipients, an additional 140,000 expat pensioners living in the European Economic Area or Switzerland also received a payment, costing a total of £24.5 million.

Winter 2015 to 2016

In winter 2015 to 2016 you will qualify for Winter Fuel Payments if:

  • you were born on or before 5 January 1953 (this date changes every year)
  • you will be living in the UK throughout the week of 21 to 27 September 2015

People may qualify for a payment if they live in Switzerland or a European Economic Area (EEA) country and have a genuine link with the UK. This year new rules are being introduced and Winter Fuel Payments will no longer be payable to people in EEA countries which have an average winter temperature that is higher than the warmest region of the UK. This includes people living in Cyprus, France, Gibraltar, Greece, Malta, Portugal or Spain.

Pensions: what happens if I access mine early?

Changes introduced from 6 April 2015 allow people to access their pension savings more freely and easily than before.

Please view our video which focuses on some of the more important points.

We have also produced a booklet which helps explain matters in more detail.

Our guide:

  • aims to help you understand the tax treatment of the options available within the new, more flexible, regime.
  • is based on our current understanding of the Taxation of Pensions Act 2014, and the Pension Schemes Act 2015.
  • does not cover every small detail, as the rules are complex – it is a broad guide only.
  • does not cover more complicated arrangements like taking money out of a pension and then putting it back into another scheme (sometimes called ‘tax free cash recycling’). If your plans include these complications, you will need to take professional advice, and will probably have to pay for it.
  • is aimed at people on relatively low incomes with smaller pension savings – generally those who have income of £20,000 a year or less.

We recommend you read it all, but it might help you to understand these key points:

  • Pension flexibility came in from 6 April 2015
  • If you are over 55 and have a ‘defined contribution’ or ‘money purchase’ pension, your pension provider might allow you to take what you like, when you like from your pension
  • Resale of existing annuities deferred until at least April 2017
  • ‘Defined benefit’ or ‘final salary’ pensions will still have stricter rules
  • There is no rush!
Ask for our free guide to pension flexibility
If you would like to obtain a copy of this form, please follow this link to our contact form.