I consider the UK State Pension to be a key component of my clients’ secure income in retirement. Therefore, it is essential to be aware of recent and expected amendments to this benefit to assist with the mapping out of a personalised financial plan.
There have been a number of major changes over the last few years to the State Pension. In April 2016 the two-tier system was replaced with a flat rate pension and from November 2018, the pension age for men and women equalised at 65.
In addition, post November 2018, the pension age continues to rise. The state pension age will increase to age 66 over the next few years although the age at which your pension commences is phased in based on your date of birth. As an example, if you are born between 6th December 1953 and 5th January 1954 your pension will come into payment on 6th March 2019. That translates to 65 years and 3 months for some but 65 years and 2 months for others. From October 2020 the State Pension will be payable close to your 66th birthday.
Do note that further increases are expected to age 67+ that will affect those born after 5th April 1960.
The new flat rate (or single tier pension) can be worth £164.35 per week (£8,546.20 per annum) moving to £168.60 per week (£8,767.20 per annum) from April 2019. What you actually receive will be based upon your National Insurance (NI) record with 35 years qualifying service being needed for a full pension.
Individuals may receive more or less than the flat rate pension and so we recommend our clients obtain a forecast through the Government Gateway service (https://www.gov.uk/government-gateway ) or through the completion of a BR19 form (https://www.gov.uk/government/publications/application-for-a-state-pension-statement).
On an informative note, the State Pension is usually paid every 4 weeks into an account of your choice. You are paid in arrears (for the last 4 weeks) and interestingly, the day your pension is paid depends on your NI number.
|Last 2 digits of your NI number||Payment day of the week|
|00 to 19||Monday|
|20 to 39||Tuesday|
|40 to 59||Wednesday|
|60 to 79||Thursday|
|80 to 99||Friday|
Other considerations you may have with regards to your State Pension are the merits or not of deferring your State Pension as well as looking to see how you can boost your qualifying record through voluntary contributions. I will touch on these issues in a future blog,
In the meantime, if you would like assistance in starting to build your personal financial plan, do contact us at Wingate .