UK pension reforms: what do you want to know? (webchat)

MaceyR

I have a question,

I admit I am no financial whizz so I have tended to just go with whatever offered via my workplace. But there was a whole thing about SERPS and contracting in/out which I never really understood (but we changed from one to the other) - does this affect my pension in the long run? I am 57.

In brief, 'contracting out' was a scheme whereby company pensions (or public service pensions) did a deal with the government. In return for the employer and employee paying reduced National Insurance Contributions, the scheme promised to pay a minimum pension in place of part of the state pension (known as 'contracting out' of SERPS). We are abolishing this system from 2016.

In an individual case you may find that your state pension is partly reduced if you have been contracted out, but in general your scheme should be paying you a pension of at least the equivalent amount of the deduction, if not more. If you wish you can apply for a state pension forecast which could give you more idea where you stand.

POGS

Mr. Webb

I have no question but I will post that I totally agree with the governments decision to 'allow', a very horrible term, war widows to remarry and keep their war widows pensions.

I will start a new thread so that this one remains a question and answer thread.

OldMike

I have very little to add to what Norfolksetter has already written.
But I was surprised to learn that military widows who re-marry will now be able to keep their widow's pensions. Would it be cynical to suggest that an inexpensive gesture that appeals to sentiment and patriotism is a cheaper vote winner than justice and fairness for old people who worked hard for their pensions.

The campaign to enable war widows to retain their pensions in the event of remarriage has been a powerful one and the government has accepted the strength of their argument, particularly given that we have an 'armed forces covenant' written into law which is about trying to tackle some of the disadvantages which people and their families can face when they serve their country.

Of course, doing the right thing by war widows, doesn't mean we can't also give justice and fairness for older people. For example, after 30 years of decline of the state pension when the 'earnings link' was broken, the Coalition reinstated it in 2010 and has introduced a 'triple lock guarantee' which means that each year the pension now rises by the highest of the growth in prices, earnings and a floor of 2.5%. As a result of this, the state pension is now a higher share of average earnings than at any point in more than two decades.

takedownthewalls

Not a gran, but a very confused under 30. I'm quite ashamed to say I really don't know much about pensions or what these changes will mean for me - I just don't understand it all. (Incidentally, I really believe we should be taught all of this in school, so we don't end up clueless like me as adults.)

Could you please give me a rundown of the things I shoulf be doing NOW to protect myself and make sure I have enough when im older and what the reforms will mean for someone of my age?

That's a good point! You may be encouraged to know that financial education has now been put on the national curriculum to help make sure that younger people understand the basics. I'm actually visiting a school later this week to see how it is going.

In terms of what you should do, the biggest single piece of advice I would give to people who are in work is that when their employer automatically enrols them into a workplace pension, you should in general stay in the scheme and not opt out. This means you are getting money from your employer and from the Government (via tax relief) in order to top up your pension. If and when you get a pay rise you may want to think about putting a bit more in, but obviously I undertand that there are many pressures on the finances of younger people.

ChrissyW

Hello Steve,

Can you clarify something for me please? I am already in receipt of my state pension ( I'm 64) and have the full qualifying years in, when the new pension system comes in will I automatically be put on the new rate or will I continue on my existing pension which will probably be less than the new one?
If this is so how can this be justified for those of us who have planned ahead as we're always being advised to do, only to be penalised for our prudency?

Thanks,
Christine

People who are already receiving their state pension, or those who reach state pension age before the new rules take effect in April 2016, will continue to receive their State Pension in line with current rules.

It is worth bearing in mind that the current system sees people not only receive a basic state pension, but also add-ons – such as SERPS or Additional State Pension – as each new reform added more complexity.

So a person receiving the basic state pension of £113.10 may also be receiving other types of state pension – and may well be above the level of the new State Pension.

Under the new State Pension we are not spending more money – we are spending the money we have more effectively. A clearer State Pension will help people to save for the future with confidence.

Morgeo

Could you please explain to me why my cousin in the USA gets an indexed pension whilst my aunt in Canada gets no increases even though she lives in a Commonwealth country. There seems to be no logic or valid reason for this. Thank you

The UK State Pension is payable worldwide but is only uprated abroad where we have a legal requirement to do so or a reciprocal agreement is in place.

This has always been the case and people who are considering emigrating abroad should always consider the impact the move could have on their future State Pension entitlement.

Information about countries where pension increases are payable can be found here:
https://www.gov.uk/government/publications/state-pensions-annual-increases-if-you-live-abroad

twistedfinger

HI there, I must admit I'm not a Gransnet user, but nonetheless I hope you'll answer my question. I'm 35, just had my 1st baby and am on maternity leave. I built a very good career before I had my daughter, of which I am proud and will at some point go back to. My question is - should I now be worried about staying off work to look after my daughter, and the resulting lack of NI payments? Should I be paying into a private pension during this time? Is there no point in pauying into a private pension if I can draw out my pension pot anyway?! Mightn't I just as well have a savings account? Thanks.

Congratulations on your new arrival! I can't give personal financial advice but in general the main advantage of saving in a pension is that you get tax relief on the money that you put in, and a quarter of the pot is tax free when you draw it out. If and when you are in paid work you should be enrolled in a workplace pension where you also get an employer contribution. So whilst there's nothing wrong with ISAs, especially for short-term saving, there are good reasons for thinking about a pension as well.

biddymarie

I dont know if you are the right person to answer this question for me,But someone told me you can be entitled to a payment i am not sure if it's called? i dont think it is the winter fuel payment,But it is a payment made by the customers electricity pple the lady who told me said you can claim if you have a combined pension of a certain amount a year but do'nt have to be on benefits,Any idea what it is called? How much most pension you have to have before you can claim?And how do you go about claiming please?
Thanking you.

There is something called the Warm Home Discount scheme where the big energy suppliers pay a credit - from memory of around £140 per year - to their customers on certain forms of pension credit. The scheme also extends to some other low income households, but the way each energy company runs it can vary. Probably the best thing to do is to talk to your own electricity company and ask them how to apply.

In addition to this, the Government runs a 'Cold Weather Payments' scheme where we automatically pay £25 per week in areas where it is freezing on average over seven consecutive days, and these payments are made to people on Pension Credit.

mouseymouse

We are living longer...yet the ageism in the workplace does not recognise this and many of us are forced to leave jobs we would be happy to stay in because of how old we are. For those of us looking for work to supplement our income or to top up NI payments it's a nightmare. Given that this affects people claiming pensions and making demands on the state even when they don't want to what would you suggest?

We very much recognise the issue of ageism and are working hard to get employers to see the value of experienced older workers. We have appointed Dr Ros Altmann (pensions expert and former head of Saga) to be our 'Business Champion for Older Workers' to spread the word. I met with Ros and a group of major employers only yesterday to discuss what more we can do to make sure firms retain, retrain and recruit older workers. We also work closely with our local Jobcentres to make sure that older people on benefit get the tailored support that they need.

maybenot

Apparently there is a shortfall in my NI contributions (from a period many years ago when I did not work) and this will affect my state pension. I am 62. What can I do about it? The shortfall is approx 8 years worth.

Broadly speaking, there are time limits which determine how far back you can go to fill gaps in your NI record. However, probably the best thing to do if you are under pension age is to get a state pension statement to see what you are going to get and whether paying extra NICs would be worthwhile (and/or possible). For those who are drawing a state pension we are introducing a scheme from October 2015 to allow you to make voluntary NI contributions - known as the state pension top-up scheme - and this may be useful to you. You can find out more by typing 'state pension top-up' into the search bar on www.gov.uk