Pension Changes In 2015/16 And What They Mean For You

Everything you need to know about the new state pension; from when it starts to if you're covered. 

When does the new state pension start?

The new state pension starts on the 6th April 2016 and will thereafter be the new comprehensive pension system in the United Kingdom. If you reach state pension age (65 for men, 63 for women) after this time, you will be covered by the new system; if you retire before then, or have already retired, you will still be covered by the old system.


I'm covered by the old system—do I need to read on?

If you're already covered by the old system, you have no need to worry as all the information pertaining to it is easily available online from the government website or from a variety of other sources.


How much can I receive?

The exact details of how the new state pension is calculated will not be fully released by the Conservative government until autumn 2015, but it has been guaranteed to be no less than £151.25 a week.

The amount you will receive from the new state pension will be affected by your national insurance contributions, with a minimum requirement of at least 35 years of contributions before you can claim any pension. However, these years do not have to be concurrent. You can also defer your pension for as long as you want, if you have a larger private pension, for example, or if you wish to continue working past the state retirement age. In this case, your pension will increase by 1% every 9 weeks you defer it, coming to an increase of 5.8% per year. So, if you can continue to work, the benefits are plentiful. However, should you need the state pension and you don’t have the 35 years of national insurance contributions—you’re not alone. The BBC estimates the new rules could leave up to 55% of pensionable age people in the UK ineligible to claim the full pension; although there will be a lower rate of pay available, and other benefits for those who are most hard up.


Can I access my pension before I reach the pensionable age?

Starting from this year, anyone over the age of 55 who has been contributing to a pension will be able to take out up to 25% of what they have saved as a tax free lump sum (or up to 25% of the total in several smaller amounts, but only 25% of each withdrawal will be tax free). So if you anticipate that you may want, or need, to take the whole 25% out at any point, it’s probably a better idea to take the lump sum option, as it will be tax-free.

From the 6th April, along with all the other changes, the maximum amount anyone is allowed to save will be reduced from £1.25 million to £1 million, although if you have a million in your pension pot it’s hard to see why you would be worrying too much about anything except having fun in your retirement!


Where can I get more information?

In the meantime, if you really want to know how much you might (remember the exact amount is not set in stone until August) be receiving under the new state pension, there are many calculators available online from a range of sources, not least from the aforementioned website.