With recent Government changes to the State Pension age, and the amount British workers are likely to receive up for debate in 2015, it is more important than ever to have a firm grasp on your pension provisions. In this blog, Acumen gives you all the facts, as well as some top tips on how to maximise your pension planning.
What is the state pension age and what’s changed?
Under the Pensions Act 2011, women’s State Pension age is set to rise to 65 between April 2016 and November 2018. From December 2018, the State Pension age for both men and women will start to increase to reach 66 by October 2020. The Pensions Act 2014 brought the increase in the State Pension age from 66 to 67 forward, so the state age pension for men and women will now increase to 67 between 2026 and 2028.
The new State Pension will be a regular payment from the government that you can claim if you reach State Pension age on or after 6 April 2016. You’ll be able to get the new State Pension if you’re eligible and a man born on or after 6 April 1951 or a woman born on or after 6 April 1953.
The full new State Pension will be no less than £148.40 per week but the actual amount will be set in autumn 2015. Your National Insurance record is used to calculate your new State Pension and you’ll usually need ten qualifying years to get any new State Pension. You can still get a State Pension if you have other income like a personal pension or a workplace pension.
Our top tips for pension planning
1. Start saving as early as possible
Of course, this isn’t always possible in the face of all our financial challenges. But consider how much money you’ll need when you’re retired. This will naturally evolve as you lose the burden of certain financial commitments but you should certainly factor in your mortgage, other sources of income, and any dependents.
2. Know what you’ve got in the pot
To see what you’re likely to get from your State Pension, you can order a State Pension Forecast or use the Government’s State Pension calculator. You may well have difficulty remembering all the pension schemes that you’ve paid into during your working life. So the government’s Pension Tracing Service is another useful tool to track down your pension pots.
3. Take advantage of your company pension scheme
Employers normally contribute to the scheme and you get tax relief on your contributions. With the new auto-enrolment system your employer automatically enrols you into the company’s pension scheme. Unless you opt out. By 2018, you’ll contribute four percent towards your pension scheme, your company puts in three percent, and the government tops it up by a further one percent.
4. Get your other finances in order
The health of our other finances often has a significant influence on our commitment to contributing to a pension. It stands to reason that we can only save for a rainy day if our day-to-day finances are in good shape. Paying off your debts before you reach retirement is essential. Considering putting money aside in a tax-free cash Isa, or stocks and shares Isa, to give you better flexibility as you near retirement.
5. Review your retirement provision regularly
Priorities change as we move through life. However, reviewing your retirement saving provision regularly should be an ever-present habit. Nearer retirement it naturally becomes more of a priority. Knowing what your retirement income could look like, you may well choose to boost your funds at this stage. Seeking independent financial advice to discuss your options could be the best investment you make.
Get some pension planning Acumen
Your pension is perhaps the most important financial investment you will ever make. Yet most people are happy to leave their pension plans in the hands of previous employers or insurance companies. Worse still, many people simply settle for ‘off-the-shelf’ products that aren’t beneficial to their financial situation.
The recent government led changes to pension contributions and tax breaks mean that it’s essential that you choose the right pension for you. We have a dedicated team of expert pension planners who can analyse your financial situation and recommend the most beneficial pension advice and pension plans specific to you and your circumstances.