Planning for retirement is always important, but with big changes happening this month regarding pensions in the UK, and more possibly afoot in the future, now is a particularly good time to consider or review your retirement plans.
What’s happening?
- Auto-enrolment of employees into a pension scheme will begin for employers with more than 120,000 people in their PAYE scheme from 1 October 2012, and you may want to consider how this may affect your household’s pension income. Auto-enrolment could be into a qualifying pension scheme chosen by the employer or into the default National Employment Savings Trust (NEST) which is backed by the Government. Alternatively, you could choose to opt out of auto-enrolment and invest in your own personal pension fund, but which is the best option for you? For instance, choosing a personal pension may allow you to make your own decisions about where your pension pot is invested. It could be beneficial to discuss these options with those affected.
- Will a new single tier state pension affect your income? Research from the Department of Work and Pensions (DWP) in August revealed that British pensioners receive anything from £7 to £230 a week in state pensions. The research also heightened the case for the introduction of a new single tier pensions system next year, which would take the state pension to £140 a week; a boost for some, but a loss for others. Relying on your state pension is usually not enough, and underestimating your final pension could affect your quality of life in retirement, meaning prudent pension planning is vital.
- Other recent research reveals that higher rate taxpayers may channel more money into their pension savings in an attempt to avoid losing out on child benefit payments when new rules come into force next year. The benefit will gradually be withdrawn from households where individuals earn more than £50,000, with a 1 per cent income tax charge of the benefit amount applied for every £100 over this income level. Depending on your earnings, some households may have their benefit cut altogether. In some cases putting more into a pension pot could be beneficial, but it’s always best to seek advice.