Higher rate than means tested benefits for the lowest earners in society
The basic State Pension will increase in tax year 2016/17 by £3.35 to £119.30 per week. Chancellor George Osborne stated this will make pensioners £1,125 a year better off.
Meanwhile, the ‘triple lock’, which ensures the State Pension rises in line with whichever is highest out of CPI inflation, average earnings increase or 2.5%, will be maintained.
New State Pension rate
The full State Pension rate for people reaching their State Pension Age from 6 April 2016 will be set at £155.65 pw. Mr Osborne says this is a higher rate than means tested benefits for the lowest earners in society.
People who contracted out of the top-up S2P and Serps schemes over the years may get less than this.
State Pension – what you need to know
The basic State Pension is currently £115.95 a week, and it will rise to £119.30 from April (applies to those reaching their State Pension age before 6 April 2016). It is currently topped up by additional State Pension entitlements – S2P and Serps – accrued during working years.
This two-tier system will change from 6 April 2016 and be entirely replaced for those reaching their State Pension age on or after that date by a ‘flat rate’ pension. George Osborne announced that the starting rate will be £155.65 a week.
Workers need to have 30 years of qualifying National Insurance contributions to get the current full State Pension, but will need 35 years of contributions to get the full flat rate State Pension in future.
Even if you paid in full for a whole 35 years, if you contracted out for some years, it might still reduce what you get.
Rises in the State Pension are presently calculated on the basis of what is known as the ‘triple lock’. This means that payouts always increase by whatever is the highest of inflation, average earnings or 2.5%.
Time to talk to Admiral Wealth Management?
If you can afford it, delaying drawing the State Pension may boost your income in the future. Deferring for just one year could make you more than £10,000 better off if you live for 24 and a half years – an average of the life expectancy of men and women. To discuss the planning options available to you, please contact Admiral Wealth Management on 01472 357035 or email email@example.com.