A highly publicised promise made during the recent state pension system shake-up stated that all British retirees who’ve paid National Insurance (NI) contributions for 30 years will receive a weekly payment of £155 from April 2016. But after accounting for the fine print, an article published by
The clause is so complicated that HMRC are struggling to calculate income and final pension payment figures with any real degree of accuracy. The crux of the matter concerns employees who’ve taken advantage of the tax-friendly terms of a Defined Benefit Pension (DBP) scheme during their career. These savers were afforded a 1.4% reduction in NI liability when contracting-out of the scheme’s additional bonuses, but that clemency has now been rescinded and retroactively reversed.
The government has effectively failed to honour the deal they devised and affected parties are furious that savings earnestly made in the past are being reclaimed as part of today’s state pension laws. Many are opening multi-currency investment accounts ahead of the new, confusing pension system that now insists on 35 years of NI payments for full £155 weekly payments. Retirement bonuses such as Pension Credits are to be withdrawn whilst closer governmental scrutiny continues.
David Retikin, Director of Operations at international pensions and retirement specialist Pryce Warner International Group explains the potential impact this could have on retirement planning:
“The DWP has massively impacted the UK pensions industry and whilst casual savers happily sit back and wait to benefit from the new system, more experienced investors are cautiously waiting for the whole picture to unfold. But the pensions and retirement plans of thousands of people are in jeopardy because they won’t be getting paid the £155 they’ve banked on; unless they make alternative arrangements, some people will now be £2,000 worse off on an annual basis.”
Many people are now daunted or even bewildered by the prospect of providing for their own retirement and feel unsure about the parliamentary changes made to the state pension scheme. Prospective investors will undoubtedly investigate their private banking options in order to make pre-retirement monies work harder, albeit with equal amounts of apprehension and anticipation as to what the final outcome will mean for assets and relative returns.
Clarification on the weekly pension payment figure retirees can expect to receive is scheduled to be issued sometime in the summer, but in the meantime, savers could benefit by seeking out independent financial advice from a reputable and reliable source. Discussing retirement funds and asset management often helps to optimise returns. Employing an investment diversification strategy can help make retirement as comfortable as can be.
Source: Digital Journal