UK Chancellor Announces Ability for Over-60s to Boost State Pension Income
The Chancellor announced in the 2013 Autumn Statement that current pensioners, and those who will reach the State Pension age before April 2016, will be able to top up their Additional State Pension through a new class of voluntary National Insurance contributions.
For those who have struggled to build up their full entitlement to the State Pension, even if they are already in retirement, this will be welcome news. Currently pensioners need 30 years of National Insurance contributions to obtain the full basic pension of £110.15 per week. Under these new plans it has been reported that someone who reaches State Pension age by 2016 could pay around £700 in return for an extra £190 a year pension for life. While people can currently buy extra National Insurance credits, this new scheme will operate separately. The scheme will be introduced in October 2015 and will be time limited. Other important announcements regarding UK pensions in the Autumn Statement include:
- Increase in State Pension age: The State Pension age will be reviewed every Parliament with the principle that people should expect to spend on average up to one third of their adult life in receipt of the State Pension. This means that the increase in State Pension age to 68 is likely to be brought forward from 2046 to the mid 2030s and is likely to increase further to 69 by the late 2040s. As a result, people in their forties will not receive a State Pension until they are 69.
- Increase in basic State Pension: Basic State Pension will be increased by £2.95 per week, making the weekly pension £113.10 for the full basic State Pension.
- Overseas pensioners: To address fraud and error, more regular contact will be made with pensioners living abroad to reduce overpayments in the State Pension system when a death goes unreported.
- Drawdown: Following a review by the Government Actuaries Department (GAD) in 2013 regarding income drawdown tables (which are used to determine capped drawdown limits for pensions like Self Invested Personal Pensions) the government confirmed it will not change the basis upon which GAD tables are formulated.
Photo Credit: “Personal finance” is copyright (c) 2010 Alan Cleaver and made available under CC BY 2.0