ISAs Maximising ISAs is an increasingly important tax planning area…
You can now get a pension forecast for the new flat rate state pension if you are 55 or over. This has recently become available as the government has widened the access to this service. You can go on line or contact the department of work and pensions by phone (tel 0845 3000 168) and request a state pension forecast. The website is www.gov.uk/state-pension-statement. It’s important to get an idea of your state pension entitlement as it has also been recently reported that many people will not get the full amount of flat rate state pension. The new flat rate pension will be between £144 and £155 per week. For those approaching retirement, even if they are 10 years away it is important to have an idea of how much core, guaranteed income you might be entitled to at retirement. This enables you to consider the situation with private pensions, in terms of funding and pension benefits.
In order to qualify, you need to have made full national insurance contributions for 35 years. You can voluntarily pay national insurance if you haven’t got enough qualifying years to get the full state pension. If you have contracted out of the second tier state pension during your working lifetime this might also reduce the amount of flat rate pension to which you are entitled. You may have forgotten or not been aware of periods of your working life when you were contracted out and this will affect your entitlement. If you were a member of a final salary scheme then it’s likely that you were contracted out. If you were a member of a group money purchase pension scheme then it is likely that you were contracted in although there were some schemes that contracted out. Contact the HMRC helpline (tel 08459 150150) for information on your contracted out service.
In order to qualify, you need to have made full
national insurance contributions for 35 years
Contracting out means that you may well have a pension pot which was formerly earmarked as protected rights. These funds are now much more flexible in terms of pension benefits than they once were, and they do have the advantage that you can access the pension benefits from age 55, take tax free cash and or income from the fund from that age and also from April, you will have full access to the fund (less any tax liabilities). Under the new pension rules you could also leave former protected rights pension pots to beneficiaries (tax free if you are under 75). State pension benefits will become available for most people a lot later and for some, especially women, the state pension date has moved into the future over the past few years.
The government has planned for an opportunity to top-up the state pension for those who are either existing pensioners or those who reach state pension age before 2016. Those eligible must have an entitlement to a UK state pension. There is an intention to introduce Class 3A national contributions in October 2015 and the scheme will be available for a limited time only. Obviously, there’s an election coming along so there might be uncertainty with this and its worth considering the cost of the top-up, your health and whether you have a spouse to leave some of the pension to on death. Also there’s the thorny issue of state pension increases in the future. At the moment, there’s the triple lock guarantee. However, this is deemed to be expensive and might not survive into the next government. In fact, on the political front there’s strong debate about where resources should go in the future. Should pensioners and soon to be pensioners benefit from tax relief on contributions, tax free cash, free TV licences, help with fuel bills – or instead should this be targeted on the younger population who have to shoulder university fees, low wages and unaffordable housing. There’s a lot of political debate on this issue and the answer will only become a lot clearer after the May election.