State Pension Changes

Recent editions of this newsletter have featured the important changes to personal pensions for those over 55 that take effect from 6 April 2015.

From 6 April 2016 the new flat rate State Pension will be introduced, which is expected to be around £150 a week.  A person’s actual entitlement will depend on their National Insurance contribution record.

Those who have built up an entitlement greater than the flat rate amount due to paying SERPs or other additional contributions will receive that higher amount.

Individuals will need a minimum of 10 qualifying years and the full flat rate State Pension will only be given if they have 35 qualifying years (previously 30 years).

Those aged over 55 are encouraged to contact the Department of Work and Pensions (DWP) to receive a projection of their expected State Pension and check their contribution record. It is possible to make good any shortfall by making voluntary Class 3 contributions (£13.90 a week).  Those who are self-employed will find it cheaper to make Class 2 contributions (currently £2.75 per week).If you are an employee or director, provided your salary exceeds the Lower Earnings Limit (currently £5,772 p.a.) then although no NIC is actually due you are deemed to have contributed for that year.

£150 a week may not seem a lot to live on but note that at a 5% annuity rate you would need a fund of over £155,000 to generate such an income.

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