Latest news with #statepension
Telegraph
2 days ago
- Business
- Telegraph
Millions to lose up to £18,000 in savings from pension reforms
Millions of workers in their 50s face losing up to £18,000 if the Government accelerates a rise in the state pension age, a leading wealth manager has warned. Rathbones, which manages the savings of older people, said introducing a state retirement age of 68 earlier than planned threatened to hit people aged 51 the hardest, while people aged 52 and 53 would also lose out. The Government is exploring whether to raise the state pension age to 68 more quickly. It is currently set to be phased in from 2044, but Liz Kendall, the Work and Pensions Secretary, is considering bringing this forward five years to 2039 as part of the Government's pensions review. According to Rathbones, those aged 51 would lose an entire year's worth of state pension payments if the timetable is accelerated. That would be worth £17,774, assuming today's state pension of £12,000 increases by the so-called triple lock each year. Under the triple lock, the state pension rises by the highest of inflation, average wages or 2.5pc per year. Meanwhile, people aged 52 would miss out on £17,340 and those aged 53 would lose £16,918. Each of those age cohorts – 51, 52 and 53-year-olds – comprise some 800,000 people, meaning around 2.4 million risk missing out on significant five-figure sums. Rebecca Williams, from Rathbones, said Britain's ageing population would put a growing strain on the public finances. She said: 'With longevity increasing and population pressures mounting, future generations appear set to face a less generous state pension regime than that enjoyed by many of today's retirees. 'The situation appears particularly precarious for those in their early 50s who face the real prospect of missing out.' The state pension age is currently 66 and will rise to 67 by 2028. Spending increasing Raising the state pension age is likely to prove politically challenging. Previous pension reviews recommended increasing the pension age in the late 2030s, but the move was not put into legislation. However, financial pressure is growing, and Ms Kendall acknowledged when launching her review that she was 'under no illusions' about the scale of the challenge. Estimates from the Office for Budget Responsibility (OBR) show that state pension payments will amount to 5.1pc of GDP this year, up from 3.6pc two decades ago. That bill will keep on mounting, rising to almost 8pc by the 2070s. Overall spending on pensioners, including the state pension, housing benefit and winter fuel payments but not counting healthcare costs, came to £150.7bn last year and will rise to £181.8bn by the end of the decade, according to the OBR. The Government has sought to limit the increase by restricting the share of pensioners who receive winter fuel payments. However, it was forced into a partial about-turn after a backlash from voters and Labour's own backbench MPs, showing the difficulties of reining in benefits spending. It means there is increasing pressure from the public finances to find ways to save money for the long term, potentially including further increases in the pension age. The Institute for Fiscal Studies estimates that raising the pension age by one year saves the Government around £6bn per year. Nigel Farage, leader of Reform UK, last week said the state of the public purse means the pension age should be increased more rapidly, in line with life expectancy. 'I don't think we can really afford to [wait to the 2040s], to be frank,' Mr Farage said. 'If there is a sudden economic miracle, then it might change that. But it does not look to be happening any time soon.' The International Monetary Fund last week said that if the Government stuck to its promise not to raise taxes on 'working people', then it would have to consider reining in spending, 'to align better the scope of public services with available resources'. 'In particular, the triple lock could be replaced with a policy of indexing the state pension to the cost of living,' the global economic watchdog said.
Daily Mail
2 days ago
- Business
- Daily Mail
Will I lose the Winter Fuel Payment if I make a pension withdrawal to replace my 'clapped out' car?
I read your article about the Winter Fuel Payment and the HMRC limit of £35,000. I have a small private pension plus my state pension. I now need to draw a lump sum of money from my pension pot, which I built up for nine years during self employment, to replace my 'clapped out' car. This could take me over the £35,000 income for the year. Do I now need to return my Winter Fuel Payment? We can't really afford to take out a loan for the car, nor would we want to with sufficient funds sitting in my pension pot. Am I now to be punished once again for putting things in place for my old age? Steve Webb replies: If your total income from your state pension, regular private pensions and lump sum pension withdrawal takes you over the £35,000 limit, then yes, your extra tax bill next year will wipe out the value of your share of this year's Winter Fuel Payment. However, it is worth remembering that, assuming you and your partner are under 80 and not receiving benefits, you are probably each receiving an equal share of the total £200 Winter Fuel Payment. It is only your share (typically £100) which is at stake if your income goes above £35,000, rather than the total household payment. There are some further aspects of this which might be worth bearing in mind. The first is that what affects your WFP is your individual income, not the combined income of you and your spouse or partner. This means that if your partner had access to a pension pot or other savings and could do this without taking their income above the £35,000 limit, then the car could be purchased without affecting the payment at all. Alternatively, if your partner was able to make some contribution to the car, but not the full amount, another option would be for you to chip in by taking a smaller pension withdrawal to 'mop up' any spare income between your current annual figure and the £35,000 limit. You could do this without affecting your WFP entitlement. Depending on the state of your 'clapped out' car, another angle to think about is whether you could hold on until the end of this tax year. If so, you could take your withdrawal in two lumps, one before 6 April 2026 and one afterwards. Provided each individual lump kept you within the limit, then your WFP would be unaffected. How do you send back a Winter Fuel Payment? Turning now to your comment about 'returning' your WFP, it's worth being clear how the process will work from this winter onwards. Under the new system, everyone who is over state pension age should be paid a WFP in full, regardless of their income. HMRC will then identify at the end of the year those individuals who had income over £35,000 and will add an amount to their tax bill to offset the WFP they received the previous winter. So you are not exactly 'returning' the WFP, you are simply facing a slightly higher tax bill next year. If you prefer, the Government has said that it will be possible, in principle, to opt out of the WFP system. But in your situation, where your income is only temporarily over the limit for one year, it's hard to see what you would gain by doing this. It would probably be far simpler to simply get a WFP, put it in the bank and earn a bit of interest, and then use it to help pay your increased tax bill for one year. If you are determined to avoid this situation you could in principle opt out this year, and then (presumably) opt in again the following year, but we have yet to see any details as to how all of this will work and how bureaucratic the whole process will be. Ask Steve Webb a pension question Former pensions minister Steve Webb is This Is Money's agony uncle. He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement. Steve left the Department for Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock. If you would like to ask Steve a question about pensions, please email him at pensionquestions@ Steve will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons. Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes. If Steve is unable to answer your question, you can also contact MoneyHelper, a Government-backed organisation which gives free assistance on pensions to the public. It can be found here and its number is 0800 011 3797.
Yahoo
3 days ago
- Business
- Yahoo
DWP confirms big change for 24 million people in August
Throughout most of August benefit and state pension payments will be dispatched as per usual on the day you typically receive your monthly dues. However, the summer bank holiday may cause a bit of muddle for some people. Those due to receive payments on Monday, August 25 will instead have their money paid on Friday, August 22. This will apply to a variety of DWP issued benefits alongside the state pension, reports Birmingham Live. If you're expecting payments on August 23 or 24, you'll likely receive your payment on August, 22. This is because payments due on weekends are typically made on the first working day prior. For money-saving tips, sign up to our Money newsletter here READ MORE: Motorists over 65 urged to sit new training to keep their driving licence READ MORE: On the edge! Desperate rescue as Waitrose lorry hangs over lake After August, the next bank holidays that will impact DWP payments will be in December. Payments expected on December 25 and 26 will be made on December 24 instead. Regardless of the payment date, the amount you receive from your benefits should remain the same unless there has been a change in circumstances that affects your benefit entitlement. Benefits affected by Summer Bank Holiday: Universal Credit State pension Pension credit Child benefit Disability living allowance Personal independence payment (PIP) Attendance allowance Carer's allowance Employment support allowance Income support Jobseeker's allowance Early benefit payments might seem like a blessing amidst the cost of living crisis, but it can throw your budget into disarray as your payments will revert to their normal date in September. Essentially, if you're paid three days earlier in August, the same amount of money you usually receive has to stretch for three extra days. It's essential to budget carefully when receiving early benefits payments to ensure your funds stretch further than usual. If you're finding it difficult to cover your expenses, you might be eligible for an advance on your benefits or loans from the DWP. These will need to be repaid through automatic deductions from your future benefit payments, but they're typically interest-free. On Universal Credit, a budgeting advance loan ranging from £348 to £812 can be borrowed, depending on your situation. The Household Support Fund has also been extended until March 2026 and can offer help to those in severe need. This fund is distributed by local councils, so you'll need to check with your local authority to see what assistance is available and whether you qualify for it. The government has encouraged councils to use this fund to support those experiencing financial hardship. However, each authority has the discretion to decide how best to utilise the fund. For example, some have opted to provide food vouchers during school holidays for families that receive free school meals. Others are partnering with relevant organisations to distribute the funds to assist individuals needing money for fuel, water and other essentials. After August, the next bank holidays that will affect DWP payments are set to take place in December. Payments due on December 25 and 26 will be processed on December 24 instead.
The Guardian
3 days ago
- Business
- The Guardian
UK pensions: will you have to retire later or pay in more?
You are going to have to start putting some money away for your retirement, or paying in more than you do now, and you are probably going to have to wait longer to get your hands on your state pension. That was effectively the message to millions of people this week when the government announced a wide-ranging review of the UK pensions system. The independent commission it launched will grapple with a host of thorny issues and make recommendations for change. Here are five things that might happen. The state pension age (SPA) is the earliest age at which an individual can start getting the state pension. It is now 66 for men and women but is scheduled to rise to 67 between 2026 and 2028. As things stand, the SPA is then scheduled to increase to 68 between 2044 and 2046, affecting those born after April 1977. However, 'a faster increase is definitely on the cards,' says Rachel Vahey, the head of public policy at the investment platform AJ Bell. Earlier this month, the Institute for Fiscal Studies thinktank put the cat among the pigeons when it warned that the SPA may have to be upped to 69 by 2049 and 74 by 2069 if the triple lock guaranteeing how much it will be worth is kept. The state pension provides the bulk of retirement income for most pensioners, so having to wait longer for it could have a huge impact on millions of people. Since 2012, employers have had to enrol eligible workers into a workplace pension scheme where both pay money in – this regime is known as automatic enrolment. The minimum contribution is a total of 8% – usually made up of 4% from the worker's salary and 1% from the government in tax relief, plus 3% from their employer. However, most experts agree that 8% isn't enough for a decent retirement income. It is not yet clear what level the government is leaning towards as a new minimum but pension providers and others have long called for the figure to be raised to 12%. Ministers have already said there will be no change to minimum auto-enrolment contribution rates during this parliament – so any increase is a few years away. The other thing the commission will look at is possibly extending auto enrolment to younger people and those on lower incomes. It now affects everyone in work aged between 22 and the state pension age who earns more than £10,000 a year in one job and doesn't already have a suitable workplace pension. Ministers could look at including workers aged 18 to 21, and those earning less than £10,000 a year, many of whom are not saving anything for their retirement. For many people, retirement is an abstract thing that is a long way off, and in terms of their money, other things are much more of a priority, such as saving for a home deposit or making sure they have some cash in a 'rainy day' savings account. Part of the answer, according to some, is to make pensions more flexible. One idea gaining a lot of traction is the 'sidecar savings' concept. Broadly, this would involve a small chunk of your pension contributions going into an accessible emergency fund that sits alongside your pension pot. The Resolution Foundation thinktank has suggested it could take the form of an easy-access savings account capped at £1,000, where anything above the ceiling flows into your pension. Allowing you to withdraw some of your pension pot to put towards a house deposit is another idea being discussed. In a recent speech, Nikhil Rathi, the chief executive of the UK's Financial Conduct Authority, said: 'Australia, New Zealand, the US, Singapore and South Africa all permit citizens to leverage their pension savings to buy a first home. Some have suggested we consider, carefully, similar approaches in some circumstances here in the UK.' Put simply, women now approaching retirement typically have roughly half the pension savings men do, with the latest government figures revealing a 'stark' 48% gap. That is the typical difference between the private pension wealth of women and men who have retirement savings and are aged 55 to 59. It looks even worse when you see it in pounds: typically, these women have built up a pension fund of £81,000 compared with £156,000 for men. That equates to an annual income for a 60-year-old of about £6,000 for women and about £11,000 for men – a difference of £5,000 a year. The government said this week that it was 'committed to both monitoring and narrowing' the gender pensions gap. Ministers could look at reducing the £10,000-a-year earnings threshold for auto enrolment because it excludes many women who hold multiple jobs or work part-time. Most experts say that it also means tackling the gender gap on pay and making childcare more affordable. Self-employed people are effectively shut out of the workplace pension system. They are not covered by auto enrolment, and they do not have an employer contributing for them. Only about 20% of the self-employed are saving into a private pension – that means more than 3 million aren't saving anything for their retirement. Many believe the answer lies in a product that already exists: the lifetime Isa. This lets people – including the self-employed – put by money for a first home or for their retirement, and the government adds a 25% bonus to their savings, up to a maximum of £1,000 a year. If you don't use it to buy your first home, you can access the money at 60. 'The 25% government bonus acts in the same way as basic-rate tax relief, and any income can be taken tax-free. There is also the ability to access money early if needed, subject to a 25% exit charge,' says Helen Morrissey, the head of retirement analysis at the investment platform Hargreaves Lansdown. Ministers could change the rules to let people over 40 open a lifetime Isa – at the moment they can't – and make them more appealing by cutting the 25% exit charge.
Daily Mail
6 days ago
- Business
- Daily Mail
State pension age 'could have to hit 80' with warnings cost crisis is even worse than feared - as union threatens to take to streets if retirement handouts are delayed
Brits are facing a stark warning today that the state pension crisis could be even worse than feared. Concerns have been raised that estimates by the Treasury's OBR watchdog might be underplaying the challenges posed by life expectancy improvements. According to analysis by consultancy Barnett Waddingham, a more 'cautious' approach would be to assume the longevity gap closes between the poorer and wealthier ends of society. That suggests spending would be the equivalent of £8billion a year higher by the mid-2070s. Maintaining the cost of the state pension at around the current proportion of GDP would then require withholding the payments until people reach 80, rather than 74 as previously mooted. The grim calculations emerged as a union threatened to take to the streets if the government tries to increase the official retirement age more quickly. The Rail, Maritime and Transport union lashed out after a government review was launched this week - although it is not expected to report until the end of the decade. Speculation is mounting about the sustainability of the pensions triple lock, which means the state's old-age payouts rise by whichever is highest out of rates of inflation, earnings or 2.5 per cent every year. A government review published in 2023 indicated that if life expectancy returned to the trajectory expected in 2014 the state pension age could be 71 by the late 2050s The OBR warned earlier this month that the policy could cost three times as much as originally expected by the end of the decade, as the ageing population piles further pressure on public finances. The pension age is already slated to rise to 67 between 2026 and 2028. Currently the legal position is that it will reach 68 from 2044-46. But a previous report by former Tesco director Baroness Neville-Rolfe cautioned that might need to be accelerated. With the triple lock in place it has been estimated the level would have to hit 74 by 2065–67 in order to keep spending at around 6 per cent of GDP. But Jack Carmichael, senior consulting actuary at Barnett Waddingham, said there was a 'very real risk' that the situation would be even worse. 'The OBR's 'Fiscal risks and sustainability' report shows the cost of State Pension as a proportion of GDP doubling over the next 50 years, driven by a growing retirement population relative to the working age population,' he said. 'The OBR's modelling uses a high life expectancy scenario, based on the ONS's definition in their population projections, that results in an additional annual State Pension cost of c£2billion in today's terms. 'It assumes a long-term rate of 1.9 per cent, rather than 1.2 per cent. 'In reality, that sensitivity is too cautious and broad-brush, which underplays the degree of longevity risk in the State Pension system. Mr Carmichael suggested it would be more appropriate to assume 'a closing of the life expectancy gap between the individuals with the lowest and highest life expectancy'. 'Not only does this more accurately capture the financial impact of longevity risk in the UK State Pension system, it is also more likely to reflect healthcare spending priorities over the next 50 years if those living the longest at the moment are assumed to have almost reached the life expectancy cap,' he said. 'Under this alternative life expectancy sensitivity, the annual cost of the State Pension would increase by c£8billion - four times higher than the current model predicts. 'To keep the cost of the State Pension at a similar proportion of GDP would then require a massive increase in the State Pension Age, potentially up to the dizzying heights of age 80.' Dr Suzy Morrissey has been commissioned by Work and Pensions Secretary Liz Kendall to look at the 'factors government should consider' on state pension age. And the Government Actuary's Department has been asked to produce a report on the proportion of adult life in retirement. However, it is understood that final decisions are highly unlikely to be taken until the next Parliament, despite concerns about giving people enough time to prepare for changes. RMT general secretary Eddie Dempsey said: 'The UK state pension is already one of the worst in the entire developed world, which is a direct result of decades of governments transferring both our national and personal wealth to the super rich. 'Any decision to squeeze more out of working people by forcing us to work even longer would be a national disgrace.' He continued: 'Our members work in physically demanding, round-the-clock, safety-critical jobs. 'Many already struggle to reach retirement in good health, especially shift workers. 'Raising the pension age even further isn't just cruel and unnecessary, it's a slap in the face to the very people who keep this country running. 'If this government makes any move to drastically increase the retirement age, we intend to lead our movement onto the streets and will not hesitate to protest nationally and take co-ordinated direct action.'
