Confused about some of the new pension and retirement changes?
We're seeing some new pension changes come into play which may impact on your personal finances. The new flat rate pension this April and then the new lifetime ISA which is being marketed as a retirement product in April 2017.
It's no wonder if you're confused.
Want to know more about the new state pension?
You can claim the new state pension from the government if you reach State Pension age on or after 6 April 2016. To be eligible you need to be :
- A man born on or after 6 April 1951
- a woman born on or after 6 April 1953
You'll get the State Pension under the old rules if you reached State Pension age before 6 April 2016 instead.
Your National Insurance record is used to calculate your new State Pension.
You'll usually need 10 qualifying years to get any new State Pension and 35 to get the payment in full.
everyone with 35 years' worth of full-rate NI contributions will receive £155.65 per week.
You can ask for a national insurance statement online to check if you have gaps in your National Insurance record. You'll need to say which years you want your statement to cover.online.hmrc.gov.uk/shortforms/form/NIStatement
Considering the new lifetime individual savings allowance for your retirement?
If you're aged between 18 and 40 from April 2017, you'll be eligible to open a new lifetime individual savings allowance.
The Lifetime Isa lets people save for retirement and a home at the same time.
You will get a 25% bonus from the government for any savings you put into it before your 50th birthday, up to £4,000 a year (i.e. if you paid in £4,000, you'd get a £1,000 bonus from the government.
Those choosing to save in a Lifetime ISA will still (if eligible) be subject to automatic enrolment so, for many, this may be an additional route to pension saving rather than an alternative to a pension.
It's worth bearing in mind that the top-up is only the equivalent of basic rate tax relief on pensions.
Lifetime individual savings allowance (LISA) v Pension
Pros of using a lifetime ISA
- A lifetime ISA can be accessed before retirement for a house purchase.
- It's a good deal for self-employed people who don't benefit from employer contributions into a workplace pension.
- It's welcome news for parents and grandparents with spare cash who want put money into a lifetime ISA for their dependents
- You've made the maximum contribution via your workplace pension and you want to supplement retirement savings
Pros of using a pension
- The best way to save for retirement is still via a workplace pension (you can have both)
- You want to access your money at age 55 rather than have to wait until you turn 60.
- You are a higher-rate taxpayer (and therefore qualify for pension tax relief at 40%)
We can help with all kinds of pension questions. If you have a question, please get in touch with us: firstname.lastname@example.org
You can call our Peterborough office on: 01733 355120 and our London Office: 020 37516510
Option for parents and grandparents helping dependants onto the housing ladder?
A lifetime individual savings account can be an attractive option for parents and grandparents to pay into a LISA for their children or grandchildren (who qualify), paticularly for helping them get onto the property ladder.
Parents and grandparents can make the most of the 25% cash injection from the government by using their £3,000 per tax year allowance that they have for inheritance tax purposes.
The same rules would apply, anyone paying into a LISA would be limited by a maximum contribution of £4,000 per year.