Auto Enrolment, drawdown freedoms and a new state pension – there is no doubt that the pension landscape is significantly changing in 2016.
With the next tax year looming – and with it, the introduction of the new state pension – there are a couple of important things you need to know about.
Those reaching state pension age on or after April 6th will qualify for the new state pension. This will be a regular payment from the government that you can claim only if you reach state pension age on or after 6 April 2016. Visit gov.uk/state-pension-age to find out if you qualify.
For those that do qualify, their basic and additional state pensions will be replaced by a flat-rate, single-tier state pension. The additional pensions and ‘contracting out’ will be abolished, and so will part of the pension credit. The old system and the new single tier system will run alongside each other for a number of years with the higher entitlement being awarded in each case.
If you reach state pension before 6 April 2016, these changes will not affect you.
The average state pension payment under the current system is £130 a week. Under the new system, some savers will be better off – but others significantly worse.
It’s worth taking a bit of time out to think about how far £130 would go. If you are employed then most businesses will have either gone through the Auto Enrolment process or be in the process of planning it. This is the simplest and most effective way for you to start building up a personal pension pot.
If you are self-employed then you should think carefully about starting to build your pension and how this will help you when you reach pensionable age. The pensions landscape is always changing and depending on your circumstances, there may be other savings options available to you.
Pensions are one of the most complex areas of the financial market and so seeking independent financial advice in this area is imperative.
If you would like to speak to one of our Independent Financial Advisors about your pension, then please call our Hove office on 01273 208813 or email [email protected]
This article was originally published on Thursday, February 11, 2016 – 13:40
For more financial information like this and to sign up for our newsletter please click here
IEP Financial is authorised and regulated by the Financial Conduct Authority (FCA).