The latest on Flat Rate Pensions

Under a new ‘single tier’ system, those approaching retirement will finally get some certainty about what is due to them.

Those approaching state pension age will be able to obtain an accurate statement of their state pension, so they will have a definitive idea of whether they will receive the full amount. Access to this statement will enable people to made a judgement as to whether they will need act to top up their contributions.

For those retiring after April 2012 will receive a ‘flat-rate’ of between £144 and £155 a week (guidelines state that it will be no less than £148.40) moving in line with expected effects of the ‘triple-lock’.

For those retiring between and April 2016 and 2021, many feel that they are still in the dark in terms of how much state pension they can expect to receive as the amount retirees will receive depends largely on how much has been paid in NI contributions.

As a rule, workers need 35 years of qualifying National Insurance contributions in order to qualify for the full single-tier state pension, compared to 30 years required to qualify for the current state pension of just £113.10 a week 

For those retiring after 2016, they will need a minimum of 10 years of NI contributions compared to the current limit of seven.

It will also affect you if you paid lower NI contributions in previous years, this could be as a result of ‘contracting out’ of additional state pension top-ups.

For older workers who’s basic state pension and additional state pensions are worth more than the new flat-rate, their payments will be honoured and this will be reflected in their statement.

According to a report conducted earlier this year by the Institute of Fiscal Studies earlier this year, under the new rules nearly three quarters of people retiring between 2016 and 2020 won’t qualify for the maximum basic state pension. The new statements will allow people to see what they will get under the new scheme and this will be based on the National Insurance record on the day they are produced.

From April 2016 the ‘two-tier’ system of the £113.10 basic state pension topped up by additional entitlements accrued during working years will no longer exist. This is because some don’t have the right number of years of NI contributions.

If you are unsure of what you can expect to receive when you retire, and would like sound financial advice on how to retire in comfort call Derngate Wealth today.

 

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