Latest news with #StatePension
Scotsman
2 hours ago
- Business
- Scotsman
Manage your finances to sail serenely into retirement
Sailing into retirement | Flamingo Images - From 7 April this year, the full State Pension was boosted by an inflation-busting 4.1 per cent to £230.25 per week. That's £11,973 per annum at age 66 for those who qualify. Sign up to our daily newsletter – Regular news stories and round-ups from around Scotland direct to your inbox Sign up Thank you for signing up! Did you know with a Digital Subscription to The Scotsman, you can get unlimited access to the website including our premium content, as well as benefiting from fewer ads, loyalty rewards and much more. Learn More Sorry, there seem to be some issues. Please try again later. Submitting... The increase is appreciated, but this level of income may not be adequate to fund a decent standard of living in retirement. And yet, according to 2024 research conducted by Aegon, more than 95 per cent of UK retirees claim to rely heavily on their State Pension income – a sobering thought. HOW MUCH RETIREMENT INCOME WILL YOU NEED? The answer is clearly much more than the State Pension, but how much more? The good news is that we are near the start of the financial tax year, which means annual investment tax relief allowances are available again. Especially those designed to boost your retirement pot, where you can invest up to £60,000 this tax year and claim tax relief at your highest marginal rate. So this is the perfect time to ask yourself that crucial retirement income question, but can you provide an accurate answer? According to research by the Pensions and Lifetime Savings Association only 23 per cent of people in the UK are confident that they know how much they need to save to provide them with the retirement lifestyle they desire. If your financial planner has invested in a cash flow modelling system, then this isn't a problem as they can provide you with all the guidance you need. This modelling can help you accurately calculate the cost of funding your chosen retirement income. This calculation is vital. It helps you create a detailed and accurate financial plan which allows you to best use your current income and growing wealth both now and well into your retirement future. Such a system can also alert you to when remedial action needs to be taken to keep your plans on track. According to the Office for National Statistics, the average value of a private pension fund in the UK today is £81,000. Using the conservative 4.6 per cent yield that Aegon used in their 2024 research, that would add just £3,726 to the State Pension raising the annual retirement income to £15,699. That is just 36 per cent of the £43,100 level which is described as 'comfortable ' by the Pensions and Lifetime Savings Association. Its definition of a comfortable retirement lifestyle is one where your annual holidays would consist of one two-week Mediterranean trip plus three long UK weekend breaks, and the ability to afford to replace a car every five years. It would represent a retirement income that is just £5,670 a year more than the 2024 UK average salary of £37, you will need to get your sums right now to better that level. But, without access to a cash flow model, how can you accurately calculate the pension pot size you will need to achieve your retirement income objectives? Why not keep your retirement income target simple and aim for, say, double the Pension and Lifetime Savings Association's comfortable lifestyle level?That would equate to an annual retirement income of £86,200, including your full State Pension. It would immediately take you high into the top 10 per cent of income earners in the UK, and would certainly fund a more 'luxurious' lifestyle in retirement. Sean Lowson | Supplied BUT CAN YOU AFFORD IT? According to the same 2024 Aegon research, a pension pot of about £250,000 would be needed to provide you with just the same level of income as the State Pension for that year, £11,500 (based on an annuity escalating with inflation). An annuity may not be the best solution for everyone, and you should certainly discuss all your alternative retirement options with your financial planner before making any said, this is still a useful rule of thumb to provide you with a simplified formula to help you estimate the fund value you might need. Assuming receipt of the full State Pension provision of £11,973, you would need an additional retirement pot of around £1.6 million to reach a retirement income of £86,200 per annum, rising with inflation. This formula is obviously a very much simplified calculation, but without such ball-park estimates you cannot gauge whether your current retirement dreams are fact or fiction. As global trade tariff uncertainty and conflicts rage on, further investment fluctuation is inevitable. There is also the possibility that future budgets may see Chancellor Rachel Reeves tinkering with some of the significant tax relief benefits your pension currently enjoys. So, it is clearly vital to get your retirement plan on a realistic track now, and a financial planner providing you with access to cash flow modelling would certainly make your task much easier.
Daily Mirror
4 hours ago
- Business
- Daily Mirror
EU country paying the highest pension and it's £8,000 more than the UK
Dreaming of retiring already? A stunning country just a couple of hours from the UK has one of the highest paying pensions in Europe - but there are several big catches Million of Brits could see a huge boost to their retirement, after HM Treasury unveiled plans to double the number of UK pension megafunds by 2030. As previously explained, this is where smaller local authorities and private workplaces come together, with the aim that bundling larger funds will result in a much greater return. The government states these changes will 'drive more investment directly into the UK economy for new homes and promising scale-up businesses'. "With over £50 billion secured through the recent voluntary commitment from pension funds to invest five percent of assets in the UK and new local investment targets for Local Government Pension Scheme authorities," HM Treasury added. "This tackles the gradual decline in domestic investment from UK pension funds, where around 20 per cent of Defined Contribution assets are currently invested compared to over 50 per cent in 2012." For now, Brits on the State Pension will receive just £230.25 a week (£11,973 per year) as long as they have enough qualifying years of National Insurance (NI). If your NI record started after April 2016, you will need 35 qualifying years to get the full rate of the New State Pension. But in comparison to nearby countries, the UK's state pension seems mediocre at best. According to the Organisation for Economic Cooperation and Development (OECD) - as of 2022 - the full basic pension in Iceland is valued at ISK 3,439,428, equivalent to 31 per cent of average worker earnings. This roughly converts to £20,063.08 per year - more than £8,000 compared to the UK state pension. "There is an annual allowance of ISK 300,000 (£1,751.11) for exempt income, equivalent to three per cent of average earnings," OECD added. "Above this allowance, the basic pension is withdrawn at a rate of 45 per cent against income from pension funds. It is also withdrawn at 45 per cent against employment income but only after employment income is above ISK 2,400, 000 (£14,011) in addition to the allowance. There is also an annual holiday payment of ISK 106,765 (£623) which is withdrawn at two per cent above the income limits." However, the State Pension age is currently 66-year-old for men and women in the UK - although it is slated to increase to 67 by 2028 - whereas the normal pension age in Iceland is already 67 (except for seamen who have been working for more than 25 years in the occupation, who can retire at 60). If you claim your basic pension in Iceland before you reach 67, your funds will be reduced by 6.6 per cent for each year that the pension is claimed early. Iceland also has a pension supplement which is applicable for single pensioners. The maximum value of this benefit is ISK 869,124 (£5,0712) per year, some eight per cent of average earnings. This benefit is withdrawn at 11.9 per cent, subject to the same thresholds as the basic pension. If you're tempted to ditch Britain for Iceland, you may want to think twice, as you can only receive the full basic pension if you have 40 years of residency. While Iceland's pension may seem extremely generous, it is worth considering that the cost of living here is around 40-50 per cent higher than in the UK. This means you'd be spending almost double on your weekly food shop, property, and basic goods.
Scottish Sun
19 hours ago
- Business
- Scottish Sun
How to legally avoid paying tax on your pension as millions hit with shock bills
Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) MILLIONS of retirees have been hit with shock tax bills after their state pension payments increased. Around 904,000 people on the state pension are now paying income tax at 40%, according to data obtained from HM Revenue and Customs in a freedom of information request. Sign up for Scottish Sun newsletter Sign up 1 Millions of retirees have been forced to pay tax on their pension for the first time Credit: Getty Meanwhile, 124,000 retirees are now paying the tax at an eye-watering 45%. The new state pension rose to £11,973 a year in April, putting it within touching distance of the £12,570 income tax threshold. But some pensioners receive more than this amount each year because they delayed the date at which they started to claim the payments. Pensioners who get income from a private pension could also find themselves pushed over this threshold. Income tax thresholds are frozen until April 2028, which means that more people could find themselves dragged into higher tax bands through a concept called fiscal drag. The higher rate tax band is frozen at £50,270, which means any earnings over this amount are taxed at 40%. Meanwhile, the additional rate tax band is fixed at £125,140, beyond which any earnings are taxed at 45%. But there are things you can do to stop a surprise tax bill landing on your doorstep. Here we explain how you can avoid the tax trap. Time your tax free withdrawals You can withdraw up to 25% of your pension pot tax free when you first retire. How to track down lost pensions worth £1,000s However, you need to pay tax on any money you withdraw beyond this. Any money you withdraw is added to the other income you receive, which could push you into a higher tax bracket. One way to avoid this is to spread out your withdrawals over several years, suggests Andrew Oxlade, investment director at Fidelity International. He said: 'If you do take a portion of the 25% tax-free sum every year, that income, along with income from Isas and your state pension, could be enough to keep taxable withdrawals from your pension below the higher-rate threshold.' How does the state pension work? AT the moment the current state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046. The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age. But not everyone gets the same amount, and you are awarded depending on your National Insurance record. For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings. The new state pension is based on people's National Insurance records. Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension. You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit. If you have gaps, you can top up your record by paying in voluntary National Insurance contributions. To get the old, full basic state pension, you will need 30 years of contributions or credits. You will need at least 10 years on your NI record to get any state pension. He adds that this could be a particularly good idea for people who do not have a particular use in mind for their tax-free sum, such as paying off their mortgage. Andrew recommends that you add up your income from other sources and take the exact amount that will keep your total income below the tax threshold. Avoid emergency tax Once you have withdrawn the tax-free portion of your pension pot you will need to pay tax on any money you take out. When this happens, many savers are put on an emergency tax code. This happens because HMRC does not have an up to date tax code for you, so as a default it charges a higher estimated rate. You may then receive an unexpected tax bill and it can take months to get the money back. One way to avoid this is to take just £1 from your pension pot, which will trigger a tax code from HMRC. What are the different types of pensions? WE round-up the main types of pension and how they differ: Personal pension or self-invested personal pension (SIPP) - This is probably the most flexible type of pension as you can choose your own provider and how much you invest. - This is probably the most flexible type of pension as you can choose your own provider and how much you invest. Workplace pension - The Government has made it compulsory for employers to automatically enrol you in your workplace pension unless you opt out. These so-called defined contribution (DC) pensions are usually chosen by your employer and you won't be able to change it. Minimum contributions are 8%, with employees paying 5% (1% in tax relief) and employers contributing 3%. - The Government has made it compulsory for employers to automatically enrol you in your workplace pension unless you opt out. These so-called defined contribution (DC) pensions are usually chosen by your employer and you won't be able to change it. Minimum contributions are 8%, with employees paying 5% (1% in tax relief) and employers contributing 3%. Final salary pension - This is also a workplace pension but here, what you get in retirement is decided based on your salary, and you'll be paid a set amount each year upon retiring. It's often referred to as a gold-plated pension or a defined benefit (DB) pension. But they're not typically offered by employers anymore. - This is also a workplace pension but here, what you get in retirement is decided based on your salary, and you'll be paid a set amount each year upon retiring. It's often referred to as a gold-plated pension or a defined benefit (DB) pension. But they're not typically offered by employers anymore. New state pension - This is what the state pays to those who reach state pension age after April 6 2016. The maximum payout is £203.85 a week and you'll need 35 years of National Insurance contributions to get this. You also need at least ten years' worth to qualify for anything at all. - This is what the state pays to those who reach state pension age after April 6 2016. The maximum payout is £203.85 a week and you'll need 35 years of National Insurance contributions to get this. You also need at least ten years' worth to qualify for anything at all. Basic state pension - If you reach the state pension age on or before April 2016, you'll get the basic state pension. The full amount is £156.20 per week and you'll need 30 years of National Insurance contributions to get this. If you have the basic state pension you may also get a top-up from what's known as the additional or second state pension. Those who have built up National Insurance contributions under both the basic and new state pensions will get a combination of both schemes. Once you have the code you can withdraw money from your pot and will be charged at the correct rate. Check your pension provider's rules to make sure it will allow you to withdraw such a small sum of money. Use your Isa Isas are a great way to top up your income without paying any tax. This is because all money you withdraw from an Isa is tax-free, so it does not count towards your taxable income. To make use of them just make sure you withdraw less than £50,271 from your private pension. You can then top up your income with money from an Isa. Or if you do not want to pay any tax then simply claim your state pension and withdraw any extra money you need from your Isa. Pay into your pot If you are still working when you start to receive the state pension then you will be able to benefit from a tax loophole. This is because you can still pay into your private pension even if you are above the state pension age, which is currently 66. Robert Cochran, retirement expert at Scottish Widows, explains: 'This can be especially beneficial if your pension income pushes you into a higher tax bracket. 'Contributions may reduce your taxable income and bring you back into a lower band.' The maximum amount that you can pay into your pension once you are above the state pension age is £10,000. This can have a significant impact on the tax you need to pay. For example, if you earned £10,000 from your job and received the full new state pension then your total income would be £21,973 a year. In total, you would pay £1,878.80 in income tax. But if you paid the money from your job into your private pension then you would not pay any tax. Make use of marriage allowance You may also be able to save on your tax bill if you are married or in a civil partnership. Depending on how much you earn, you may be able to transfer some of your personal allowance to your partner. This tax perk is called marriage tax allowance. You can transfer up to £1,260 of your personal allowance to your husband, wife or civil partner. Doing so reduces your tax bill by up to £252 a year. To benefit you need to be earning less than your personal allowance, which is £12,570. Meanwhile, your partner must earn less than £50,270. You can check if you will benefit from marriage tax allowance using the calculator on the website. Do you have a money problem that needs sorting? Get in touch by emailing money-sm@ Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories
Wales Online
a day ago
- Business
- Wales Online
People over certain age urged to claim £303 state pension boost
People over certain age urged to claim £303 state pension boost HMRC will add National Insurance credits to your State Pension if you look after a child related to you under the age of 12 - this can be worth a few thousand pounds over a typical 20-year retirement Elderly individuals who provide care for children under 12 during term-time or school holidays could potentially increase their State Pension payments by over £6,000 across a typical 20-year retirement period. This is possible through claiming a National Insurance benefit from HM Revenue and Customs (HMRC). A single additional National Insurance credit can add approximately £303 per year to the full New State Pension. This State Pension enhancement is known as Specified Adult Childcare. It operates by transferring the National Insurance credit linked to Child Benefit from the recipient of the Child Benefit to a family member who is caring for a related child under 12, or under 17 if the child has a disability. You will be granted a Class 3 National Insurance credit for each week or part of a week you cared for the child. However, only one credit is available per Child Benefit claim, regardless of the number of children included in the claim. For instance, if two grandparents cared for their daughter's two children, only one credit is available for transfer. The recipient of the Child Benefit must decide who receives the credit, reports the Daily Record. However, if the grandparents also have a son and they care for both their daughter's and son's children, there are likely two Child Benefit recipients. Therefore, two credits would be available for transfer. If no one has claimed Child Benefit for the child, there is no attached National Insurance credit to transfer and credits cannot be awarded. The boost is primarily designed for those caring for children whose parents are employed, meaning they don't require the National Insurance credits from Child Benefit for their own State Pension. It's worth noting that retrospective claims for Specified Adult Childcare can be made dating back to 6 April 2011. Claims for providing remote care during the Covid-19 pandemic According to guidance, your usual care arrangements may have been disrupted by Covid-19 since March 2020. This implies that if you provided care remotely via phone, text message or video call during the pandemic and subsequent lockdowns, you might be eligible to fill any gaps in your National Insurance record by claiming Specified Adult Childcare. This applies to the tax years 2019 to 2020 and 2020 to 2021. The full New State Pension amounts to £230.25 per week, equivalent to £11,973 annually. However, to receive this maximum amount, approximately 35 years' worth of National Insurance contributions are required. A minimum of 10 years is needed to receive any payment at all. Some individuals may have been 'contracted out' and will need more than 35 years. Who is eligible to apply for Specified Adult Childcare credits? You can apply provided: you are an eligible family member who provided care for a child under 12 you were over 16 and under State Pension age when you provided care for the child you are ordinarily resident in the UK but not the Channel Islands or the Isle of Man the child's parent (or main carer) has claimed Child Benefit but does not need the credits themselves The child's parent (or primary carer) consents to your application by counter-signing the form to confirm that you: provided care for their child for the period stated can have the credits for the period stated Who qualifies as an eligible family member You are classed as an eligible family member if you are the: mother or father who does not live with the child grandparent, great-grandparent or great-great-grandparent brother or sister - including a half-brother or half-sister, step-brother or step-sister, an adopted brother or an adopted sister, aunt or uncle You are also classed as an eligible family member if you are either the: current or previous husband, wife, partner or civil partner of anyone in the list above son or daughter of the current or previous husband, wife, partner or civil partner of anyone in the list above Who should refrain from applying You should not apply for credits if for the same period you: already have a qualifying year of National Insurance - usually because you work or receive other National Insurance credits are receiving Child Benefit for any child and already get credits automatically If you are the spouse or partner living with the Child Benefit recipient and want to transfer the credits to yourself, you need to complete form CF411A - more details here. When to submit your application You must wait until October 31 following the end of the tax year for which you want to apply. This means you can now claim for the financial years 2011/12 - 2023/24. This is due to HMRC needing to verify that the parent or primary carer already has a qualifying year for National Insurance purposes. What you require to apply You will need the following to apply: your personal details as the eligible family member that provided care for the child the child's details and the periods you provided care for them the personal details of the child's parent or main carer - the Child Benefit recipient Article continues below The HMRC guidance explains that both you and the Child Benefit recipient must sign a declaration on the application form. It also says that the child's parent or main carer should check their National Insurance record online before you apply, to check that they have credits to transfer. Complete information on how to apply can be found on the website.
Wales Online
2 days ago
- Business
- Wales Online
DWP universal credit and benefits to rise in June for some after delays
DWP universal credit and benefits to rise in June for some after delays A list of benefits were increased in April but many have yet to see the new higher rates People claiming certain benefits are set to see a rise in how much they get after delays. In April 2025 those receiving working age or disability benefits saw a 1.7% uplift. However, despite the Department for Work and Pensions (DWP) implementing the new rates on April 7 most claimants didn't see the increased payments until the following month. This is due to most payments being made four weeks in arrears. However, some State Pension recipients - that payment rose 4.1% in April - who receive payments weekly or fortnightly saw the uplift sooner. For money-saving tips, sign up to our Money newsletter here Universal Credit operates slightly differently, with assessment periods running from month-to-month on a specific date, meaning that for some the higher amount did not arrive until the next payment cycle in May while others have still yet to see the rise and will see it in June. It means that the date you'll receive the pay boost will depend on when your last assessment period was. Here's how your previous assessment period affects when you'll get the payment boost: March 17 to April 16 - increase applied in May, you'll get it in your payment on May 21 March 18 to April 17 - increase applied in May, you'll get it in your payment on May 22 March 19 to April 18 - increase applied in May, you'll get it in your payment on May 23 March 20 to April 19 - increase applied in May, you'll get it in your payment on May 24 March 21 to April 20 - increase applied in May, you'll get it in your payment on May 25 March 22 to April 21 - increase applied in May, you'll get it in your payment on May 26 March 23 to April 22 - increase applied in May, you'll get it in your payment on May 27 March 24 to April 23 - increase applied in May, you'll get it in your payment on May 28 March 25 to April 24 - increase applied in May, you'll get it in your payment on May 29 March 26 to April 25 - increase applied in May, you'll get it in your payment on May 30 March 27 to April 26 - increase applied in May, you'll get it in your payment on May 31 March 28 to April 27 - increase applied in June, you'll get it in your payment on June 1 March 29 to April 28 - increase applied in June, you'll get it in your payment on June 2 March 30 to April 29 - increase applied in June, you'll get it in your payment on June 5 March 31 to April 30 - increase applied in June, you'll get it in your payment on June 6 April 1 to April 31 - increase applied in June, you'll get it in your payment on June 7 April 2 to May 1 - increase applied in June, you'll get it in your payment on June 8 April 3 to May 2 - increase applied in June, you'll get it in your payment on June 9 April 4 to May 3 - increase applied in June, you'll get it in your payment on June 10 April 5 to May 4 - increase applied in June, you'll get it in your payment on June 11 April 6 to May 5 - increase applied in June, you'll get it in your payment on June 12 Here's a full list of the new benefit rates for 2025-26 so you can check how much extra you might get. Universal Credit Universal Credit standard allowance (monthly) Single, under 25: £316.98 (up from £311.68) Single, 25 or over: £400.14 (up from £393.45) Joint claimants both under 25: £497.55 (up from £489.23) Joint claimants, one or both 25+: £628.10 (up from £617.60) Extra amounts for children First child (born before April 6, 2017): £339 (up from £333.33) Child born after April 6, 2017 or subsequent children: £292.81 (up from £287.92) Disabled child (lower rate): £158.76 (up from £156.11) Disabled child (higher rate): £495.87 (up from £487.58) Extra for limited capability for work Limited capability: £158.76 (up from £156.11) Work-related activity: £423.27 (up from £416.19) Carer's element Caring for a severely disabled person at least 35 hours a week: £201.68 (up from £198.31) Article continues below Work allowance increases
