There’s been a lot of talk lately about the new changes that have recently been applied to the current pension system and there is even more talk now about the future.
The Queen of England is set to announce the details of the government’s pension bill in the coming days. One of the important mentions in the bill is the introduction of the flat rate state pension for anyone who reaches retirement after April 2016.
The new changes will essentially make the pension income completely dependent on NI contributions. A 35 years minimum worth of contributions, to be precise, for those who want to redeem the full amount. To claim any pension income at all, would require a set number of years to be put in NI contributions. Though no word is final, the number is expected to be between 7 and 10 years. These are not difficult numbers to meet since most of the UK population starts working in their mid 20s if not earlier.
This change is expected to affect everyone, from married couples to those who are considering a single annuity or joint annuity scheme for their retirement. The increase in life expectancy is one of the factors that led to a steady decline in pension incomes for the last 10 years. Yet the number of people claiming pension continues to rise. In 2012 alone, over 1.7 million UK pensioners received married couple’s pension. This amount is expected to remain the same if not increase in the years to come.
The good news to take from all this is that those who have already retired won’t be affected by the new changes, however, those who are retiring after April 2016 will need to have the right number of years in NI contributions accumulated to make the most of it.
Married couples needs to be extremely careful because previously couples had the luxury of combining their total years worked to obtain a larger sum of the pension. With the new flat pension rate change, each pensioner is on his/her own and will need to have a minimum of 7 to 10 years of NI contributions under their belt to claim some pension income or have 35 years of contribution on his own to get the entire sum.