The new system will apply to you if you are a man born on or after 6 April 1951, or a woman born on or after 6 April 1953. To save the state money, the official retirement age is gradually being raised. While many women currently get the state pension at age 63 and men at age 65, the thresholds are moving up. They will rise to at least 66 for both by 2020, and possibly to 68 in the 2030s
The maximum flat-rate people can receive under the new single-tier system has been set at £155.65 a week. This will be paid as long as men and women have built up the necessary 35 qualifying years. As a general rule, you’ll get the equivalent value of the state pension according to the total number of years you’ve built up – so 23 years would give you roughly two thirds of the payout, or about £103.
It’s estimated less than half retiring under the new system will qualify for the full flat-rate amount in the first five years. This is mainly due to the numbers of people who won’t have enough qualifying NI years because they’ve been what’s known as ‘contracted out’ of the old state pension in the past.
Now, if you are, or were, in what is known as a defined benefit pension, you’re likely to have been ‘contracted out’ of the additional state pension. In a nutshell, it meant workers paid a lower rate of NI contributions. This was because, in return, they will have paid extra into their workplace scheme, or had it paid for them by their employer. Millions of workers with company pensions in the public and private sectors are affected. Some stakeholder and personal pension schemes were also contracted out.
This means that, for the purposes of eligibility, you may not qualify for a full £155.65 despite having what you thought were 35 years of NI contribution.
I have been a fully Qualified Financial Adviser for 28 years and also understand the needs of expats and the rules that apply to ex British living and retiring in Spain. In today’s financial climate it is essential you do everything you can to make sure your money is safe and secure, ensuring that what you want to transpire in the future has the best chance of happening.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
I am compelled to discuss some sales tactics that are becoming increasingly frustrating by companies that are forcing their customers to take out products that they do not necessarily need or want.
Much has happened since I last put pen to paper in the immediate aftermath of the referendum result and I thought it sensible to comment on some of the issues which are emerging from the ‘swirling fog’ that we experiencing. July 24th 2016, reminded me of September 12th 2001 in New York, with people walking around in shock, confused at the attack on the political and economic system. To be angry at the shock of the unexpected result and how that might affect everyone’s life is a natural and rational response, however much it might seem otherwise. Last week I wrote that the result was not a disaster and the financial system was capable of absorbing this shock, in short, my view has not changed.