You and your Pension – are you a loser or a loser?

I don’t suppose for one second that you have failed to notice that this unelected, un-democratic government have set about reforming things.  Reform is good, right?

One of the things that they have been reforming is Pensions.

I don’t normally thank the Mail for much, but I really do think that I should thank them for making me aware that when it comes to Pensions and their Reform there will be Losers and there will be Losers.

I refer to yesterday’s article

MPs face anger over the 80,000 women denied the new pension: Forced to wait longer to retire…and they will miss out on £144 payout for rest of life

I am in no way demeaning the effect that this new policy will have on women (honest girls) but this article also brought o my attention something that will inevitably affect us all.

The rules for almost all Occupational Pension Schemes have been changed over the last year or so.  Most, if not all, involve one or more of the following;

  • Increased Contributions
  • Work or Pay In longer
  • Loss of Final Salary to Career Average Schemes
  • Reduced level of Pension ultimately payable

Controversially the government has decided that these new Terms and Conditions will apply to both new members and existing members of the schemes., meaning that existing members of the schemes will also benefit from the reduced size of the Pension Pots available.  A small number of exemptions have been applied but the vast majority of people will find their pensions affected in this way I believe.

So, if you’re in a Pension Scheme you’re a Loser, right?

Now we come on to State Pensions.

The basic State Pension is a regular payment from the government that you can get when you reach State Pension age.

To get it you must have paid or been credited with National Insurance contributions.

The most you can currently get is £107.45 per week.

The basic State Pension increases every year by whichever is the highest:

  • earnings – the average percentage growth in wages (in Great Britain)
  • prices – the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI)
  • 2.5%

In April 2017 the government also intends to introduce  a new single-tier State pension.

The single-tier pension will:

be set above the basic level of means-tested support (the Pension Credit Standard Minimum Guarantee, currently £142.70 per week for a single pensioner). The current legislative requirement to increase the basic

  • State Pension at least in line with average growth in earnings will also apply to the single-tier pension. For illustrative purposes, this document assumes uprating of the single-tier pension by the triple lock, in line with coalition policy for uprating the basic State Pension;
  • replace the State Second Pension, contracting out and outdated additions, such as the Category D pension and the Age Addition. The Savings Credit element of Pension Credit will also close to pensioners reaching State Pension age after the implementation of the single-tier pension;
  • require 35 qualifying years of National Insurance contributions (NICs) or credits for the full amount. There will also be a minimum qualifying period of between seven and ten qualifying years (modelled as ten throughout this document). Those with fewer than 35 qualifying years but above the minimum qualifying period will receive a proportionally smaller single-tier amount;
  • be based on individual qualification, without the facility to inherit or derive rights to the state pension from a spouse or civil partner; and
  • continue to allow people to defer claiming their state pension and receive a higher weekly state pension in return. The deferral rate will be finalised closer to the planned implementation date. It will no longer be possible to receive deferred state pension as a lump-sum payment.

So, the new, simplified, Basic State Pension looks OK, £142 per week instead of £107 per week at today’s rates.

Except for the fact that if you are already drawing your State Pension you will stay in the old Scheme.

A woman born on April 6, 1953 will be entitled to her State pension from July 6, 2016 when she is aged 63 years and three months.

Given her retirement is before April 2017, this means she will continue to be paid under the current State pension rules.

Similarly, a woman born on July 5, 1963 has a State pension age of March 6, 2017, which again means that she is excluded from the new single-tier State pension. However, a woman born a day later on July 6, 1953 has a State pension age of July 6, 2017, making her eligible for the new pension.

So, therefore, if you are already drawing your State Pension, or are due to reach State Retirement age before 6th July 2017 you are a Loser.

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