Monthly Archives: May 2023

HOW MUCH HAS THE 2023/24 STATE PENSION INCREASED BY?

If you are a UK resident planning for your retirement, it’s important to be aware of the State Pension changes that have taken effect in the new tax year. From April, the amount you can now receive as part of the UK State Pension has risen, which will be welcome news to those who have retired or are nearing retirement age.

Knowing what to expect from your future State Pension, and when you can expect to start receiving it, is an essential part of planning for retirement. This may involve making contributions to the National Insurance scheme, which can provide additional entitlements on top of the basic State Pension.

Unlike a private pension, the State Pension is a four-weekly payment made by the government to people who have reached the qualifying age and have paid enough National Insurance contributions.

In November last year, the government confirmed that the State Pension would increase by 10.1% – in line with September’s Consumer Prices Index (CPI) measure of inflation.

From April 2023, payments are:

• £203.85 a week (up from £185.15) for the full, new flat-rate State Pension (for those who reached State Pension age after April 2016)

• £156.20 a week (up from £141.85) for the full, old basic State Pension (for those who reached State Pension age before April 2016)

HOW IS THE STATE PENSION AGE CHANGING?
In addition to the increase in the pension amount, there are also changes being considered to the State Pension age. This means that the age at which you can start receiving your pension may be adjusted in line with life expectancy changes.

The government says 12.4 million people currently receive the State Pension. Men and women born between 6 October 1954 and 5 April 1960 start receiving theirs at the age of 66.

But for people born after this date, the State Pension age is gradually increasing to 67 by 2028 and 68 by 2046. At a cost of £105 billion, the StatePension accounts for just under half the total amount the government spends on benefits.

WANT TO EXPLORE YOUR OPTIONS FOR RETIREMENT SAVINGS?
The key to successful retirement planning is to start early and stay informed. By keeping up to date with State Pension changes and exploring your options for retirement savings, you can help ensure a financially stable and comfortable retirement. To get your retirement plans in motion, talk to us about your finances. We look forward to hearing from you.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS PLAN HAS A PROTECTED PENSION AGE).

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.

KNOWING HOW MUCH YOU’LL RECEIVE IS VITAL FOR PLANNING YOUR FUTURE FINANCES

The State Pension age is set to rise to 67 by 2028, followed by a subsequent rise to 68 between 2044 and 2046. However, there is currently a review being conducted to determine the appropriateness of the existing timetable.

This review will help to determine whether further adjustments to the State Pension age will be required in the future. As a result, it is likely that individuals’ retirement planning will need to be flexible enough to accommodate potential future changes to the State Pension age.

ACCESSIBLE INFORMATION

New research has revealed that one in seven (14%) of retirees received less money from the State Pension than they had expected[1]. This highlights the need for more accessible information on what individuals can expect to receive from the government during their later years.

The study also revealed that a fifth (20%) of retirees were unaware of how much they would receive from the State Pension before they retired, while one in ten (9%) found it challenging to determine what their payments would be.

KNOWLEDGE GAP

The lack of awareness was observed not only among full-time workers but also part-time workers, with the knowledge gap being significant between homeowners (38% unsure) and those living in rented accommodation or with family members (50% and 54%, respectively).

The study also found that pre-retirees shared a similar level of uncertainty regarding their State Pension. Approximately three in ten (28%) respondents did not know their State Pension age, while 44% were unaware of the amount they could expect to receive from the State Pension upon retirement.

TRIPLE LOCK

Questions surrounding the ‘Triple Lock’ and the potential for the planned rise in State Pension age to 68 to be brought forward have added to the uncertainty surrounding the State Pension.

It’s essential to note that individuals need to claim their new State Pension as it is not granted automatically. Typically, an invitation letter would be sent no later than two months before reaching the State Pension age, explaining the steps to claim the pension benefits.

PENSION ENTITLEMENTS

If someone is nearing the State Pension age and has not received an invitation letter, the individual could still submit a claim. In such cases, the quickest way to apply for the pension is online.

The constantly changing landscape can make it difficult to keep up with the latest information and seek advice on the value of pension entitlements and the age at which people will qualify for payments. As the State Pension is a crucial source of retirement income for many people, knowing how much they will receive is vital for planning their future finances.

FINDING PLANNING FOR YOUR RETIREMENT A DAUNTING TASK?
We understand that planning for retirement can be a daunting task, which is why we offer our expertise to make the process as smooth and stress-free as possible. We’ll review your retirement plans and give you personalised advice on where to save and how to make your finances more tax-efficient. We take pride in doing the hard work needed to ensure that you’re in the best possible position when it comes to your pensions. For more information about your retirement options, please contact us.

MONEY AND FINANCES ARE OFTEN A COMMON SOURCE OF DISAGREEMENT AND STRESS

When you get married, or cohabit, you are not just blending your hearts and lives together, you are also combining your finances. So it is important that you take the time to discuss and plan how you will manage your combined resources in order to ensure financial security for both of you.

NO ONE-SIZE-FITS-ALL APPROACH

When it comes to managing finances as a couple there is no one-size-fits-all approach, especially in these trying times when prices are constantly rising. 38% of couples prefer having some mix- and-match accounts with money in both joint and separate accounts, 29% opt for pooling both incomes into a single account, and 27% keep things completely separate.

Openness and honesty are meant to be key components in any successful relationship; however the figures revealed that 26% of 35-44-year-olds had lied to their partner about money while only 12% of those over 65 confessed the same.

SET REALISTIC EXPECTATIONS

The good news is that, overall, 47% described talking about finances with their partner as being natural and part of daily conversation. 11%, mainly among 35-44-year-olds, find it awkward while 10%, also mostly coming from this demographic group said they would avoid doing so altogether.

Building a secure financial future with your partner starts with planning. Honesty is the best policy when it comes to finances; couples should have clear, open conversations about their financial issues, hopes and aspirations. Doing this will help set realistic expectations, address any potential problems, develop a budget that works for both of them and create an overall stronger financial plan.

MAKE INFORMED DECISIONS

Agreeing on one or two shared goals as a couple can provide you with an additional source of motivation to stay on track. Once you know your goals, you’ll be able to make informed decisions about how much money to save and where to invest it.

For example, if you have a goal of moving into a bigger property in three years’ time, then it might be wise to put that amount into a cash savings account in order to minimise risk. For longer-term goals (10+ years away), investments in the stock market may provide more growth potential in the long run and improve your chances of hitting your targets faster.

ADVANTAGE OF TAX BENEFITS

Appropriate tax planning will ensure more of your money goes towards your future. Consider taking advantage of the tax benefits available through Individual Savings Accounts (ISAs). Each partner can currently contribute up to £20,000 (for tax year 2022/23), enabling you to shield the money from Income and Capital Gains taxes.

You may also benefit from the Capital Gains Tax exemption, which lets both partners realise up to £12,300 (for tax year 2022/23) in investment gains without paying anything. However, the threshold for paying Capital Gains Tax has been reduced to £6,000 for the 2023/24 tax year and will be cut again to £3,000 in the 2024/25 tax year.

WORST-CASE SCENARIO

For married or civil partnerships couples, this exemption could be further doubled as investments can be transferred between partners tax-free. Additionally, every person has their own personal savings allowance where they don’t have to pay tax on interest earned up to a certain amount, so you should take advantage of this.

Considering the ‘worst-case scenario’ can be a tough conversation to have, but it’s one that you and your partner should have in order to ensure that you are both financially secure. Taking out the right insurance policies and drawing up a Will may not make for the most romantic dates, but they are important steps to protect yourselves financially. By doing these two things, you can rest assured knowing that your wishes will be followed, even if one of you passes away or suffers from an illness

READY TO DISCUSS YOUR FINANCIAL SITUATION TO MAKE SURE YOUR MONEY IS BEING MANAGED RESPONSIBLY?
When you are in a relationship, it is important to arrange your finances as a couple. As we’ve seen, couples often face financial challenges such as making ends meet, planning for retirement and saving for future goals. By taking the time to discuss your financial situation, you can make sure your money is being managed responsibly and that you are on the same page financially. To discuss how we can help, please contact us.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

OVER A THIRD OF OVER-55s THINK THEY WILL WORK BEYOND THEIR STATE PENSION AGE

We are witnessing a surge in the number of people giving retirement a second thought due to inflation rates and the cost of living crisis. Not only are more individuals looking to work beyond their State Pension age, but some are returning to employment after retiring due to increasing financial pressures.

Over 2.5 million people aged 55 and over will be impacted by the long-term effects of financial insecurity and think they will continue to work past their State Pension age. Additionally, half of those aged 55 and over don’t believe their pension is enough to fund their retirement, a new survey has revealed.

INCREASING COST OF LIVING

Nearly four in ten over-55s who are not retired anticipate having to work past their State Pension age due to the increasing cost of living. Financial concerns surrounding retirement funding are the top drivers behind working beyond State Pension age.

A quarter (23%) are uncertain of how long their retirement savings will last, and almost one-fifth (18%) admit to not having made any preparations for when they stop working.

ABILITY TO REMAIN EMPLOYED

Nearly half (46%) of the millions of older workers expecting to work past their State Pension age are apprehensive that doing so will mean they can’t enjoy their later years.

Health, too, is another major concern, with nearly half (45%) worrying their health will deteriorate as a result of having to continue working and more than a third (35%) concerned it will affect their ability to remain employed.

HEAVY FINANCIAL STRAIN

Worryingly, 16% are concerned about being treated differently or worse at work because of their age and the same number worried about not being able to spend enough time with their family due to work commitments.

Looking ahead, the older workforce is expected to be crucial to the UK’s economic recovery as it will help ease severe labour shortages, yet this warning sign points to heavy financial strain many are facing.

WILL YOU ENJOY THE RETIREMENT YOU DESERVE?
We all want to be in control of our retirement plans and feel confident we can stop working when we want to so that we can enjoy the retirement we deserve. If you are worried about how your current situation and the cost of living could impact on your retirement savings, we are here to talk through your options. To find out more, please speak to us.