MSE News: Major pension changes imminent

This is the discussion thread for the following MSE News Story:

"You could miss out on £1,000s if you don't act in time, with the start of the revolution next month ..."

Read the full story:
Major pension changes imminent

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  • dunstonhdunstonh Forumite
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    Last chance to take pensions at 50, the min. age jumps to 55. Until 6 April, most private pension holders can take a tax-free lump sum and/or draw an income from age 50, after that you must be 55. Those aged 50-54 now should urgently check if it's worth taking it now. For pros & cons, see DirectGov and speak to a pensions adviser.

    The pros and cons are not on that web link.

    The FSA have issue warnings to advisers about people taking their pension earlier because of this rule change just to get the lump sum. It should be considered a higher risk transaction. Perhaps MSE should make it clear that that there are potentially significant issues to doing this and it is not somethign that should be done lightly.

    Although for many people now, it is going to be cutting it too close to do anything about it.
    The next few years see the biggest pensions revolution for a generation.

    You mean since 2006 ;)
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • this is really a question for mse guy.
    i will be 60 in sept 2010 but because of my d.o.b. i will not get my state pension until march 2011. i have been given a state pension forecast stating i will receive full pension and my n.i. contributions show i have 30 qualifying years.
    will the changes in april affect me?
    will i have to buy more stamps before april, if so how much is it likely to cost?

    i am finding this all very confusing and cannot keep up with all these changes.
    i still don't know if i get my winter fuel allowance when i'm 60 or following march or myfree bus pass or prescriptions.

    any advice gratefully received

    kind regards
    jodem
  • jh2009jh2009 Forumite
    362 Posts
    If you have 30 qualifying years then you will get a full state pension if your state retirement age is on or after 6 April 2010.

    Im not 100% about the prescriptions/bus pass/winter fuel allowance, but i think as state pension ages for females raises to 65 between 2010 to 2020, then the qualifying age for these is also being gradually increased in the same way.
  • :jthanks for the reply, you've put my mind at rest now.

    kind regards

    jodem
  • stphnsteveystphnstevey Forumite
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    With regards to the National Pension Scheme in 2012 - could employers legitimately give you a pay cut to compensate for the extra they have to pay into a pension?

    At the very least it would slow salary increases
  • Debt_Free_ChickDebt_Free_Chick Forumite
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    With regards to the National Pension Scheme in 2012 - could employers legitimately give you a pay cut to compensate for the extra they have to pay into a pension?

    Effectively, no. The Pensions Act contains provisions that specifically prohibit employers from offering employees an inducement to opt out of NEST (Personal Accounts ... but I must try and use the new term!!).

    So if your employer offered you "salary £x, with a contribution to NEST" or "higher salary £y, with no contribution to NEST", that would be an inducement and is specifically prohibited.

    What is more likely to happen is that the pension contributions will be factored in to future pay increases, so that they will be less than that might otherwise have been, had NEST and auto-enrolment not been brought in.
    At the very least it would slow salary increases

    I imagine that this will be the outcome, but it won't be an obvious and specific reason for any slowdown. And it probably won't be the only reason either!
    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
  • NSinclairNSinclair Forumite
    16 Posts
    I was born on 7 August 1955 and have my 39 years of pensions contributions. Is my understanding right that as from 1 April 2010 I will not now be elible to recieve my state pension until 2020. I was expecting to receive my pension in 2015!! That looks like I will loose out on £26,000 pension benefit? This cannot surely be right as I will have paid contributions for 49 years by then. Can anyone adivse?
  • jem16jem16 Forumite
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    NSinclair wrote: »
    Is my understanding right that as from 1 April 2010 I will not now be elible to recieve my state pension until 2020. I was expecting to receive my pension in 2015!!

    I'm assuming you are female and expected to receive your state pension at age 60? Yes you will not now receive it till age 65. This has been announced for a long time now, somewhere around 1993.
    That looks like I will loose out on £26,000 pension benefit? This cannot surely be right as I will have paid contributions for 49 years by then. Can anyone adivse?

    NI contributions are not only for the state pension - they provide other benefits such as NHS health care, sick pay etc. If you continue to work until age 65 then yes you will pay NI.
  • jamesdjamesd Forumite
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    You're right that it won't be until you're 65. Women on average live about three years longer than men so they should really be retiring a year or two older than men but it's a bit closer to fair than it was.

    The changes are to deal with that sort of inequality and to allow for the increased life expectancies, leading to the pensions being paid out for more years. That has to be paid for somehow. That's being done in part by increasing the number of contributing/working years and decreasing the number of retired/paying out years for both men and women to a number closer to the level it used to be at when the 65/60 ages were originally set.

    You already have far more working years than required (assuming have never been paying the reduced women's stamp!) because you only need 30 years of contributions to get the maximum basic state pension. This reduction was mainly intended to help women with limited numbers of working years, though a few men also benefit.

    You should benefit from higher additional state pension payments due to the extra working years. Additional state pension is from a combination of S2P (the current system), SERPS (what S2P replaced) and its predecessor earnings-related pension schemes.

    If you've ever paid the women's stamp instead of the full NI contributions you should write more about that because you may not be entitled to any state pension in your own name if you've only ever paid the women's stamp rate.
  • jh2009jh2009 Forumite
    362 Posts
    This calculator helps people calculate their state retirement age, as Legislation currently stands. It may or may not help someone.

    http://www.pensionsadvisoryservice.org.uk/state-pensions/state-pension-age-calculator?

    There is of course speculation that state pension age may increase to 70, and also the tories have stated they might bring this forward ten years, but all of this is something to be argued about no doubt in the future.
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