As of April 5 this year, the stateunderwent pretty radical and sweeping changes to say the least. Don’t be fooled by the rather modest change in title to the ‘new state pension’ – the modifications were and will continue to be a very big deal.
In the weeks following the budget, experts all over the UK have been sharing their own essential tips, tricks and reminders with regard to advising clients on the most important elements of the changes.
Here’s a quick rundown of just a few of the facts and figures being highlighted by the country’s IFA community:
1. First of all, the new state pension cannot be claimed until the person in question reaches the specified age. As of October 2020, the state pension age in the UK will increase to 66 for both women and men alike.
2. The new state pension will not be paid automatically, but must instead be applied for. Prior to becoming eligible for NSP payments, clients will receive a letter informing them of this, four months ahead of their respective commencement date. If notification is not received, they must go online or get in touch by phone on 0800 731 7898.
3. Clients should check their National Insurance contributions to find out whether they will qualify for the full new state pension. 35 years of contributions are necessary to quality for the full amount, while ten years are necessary to claim any new state pension at all.
4. Anyone over the age of 50 can request a statement of their own new state pension entitlement. This can be done by accessing the Gov.uk website, or by calling 0345 3000 168.
5. There are many instances in which it could be beneficial for clients to pay voluntary National Insurance contributions, in order to gain access to any NSP entitlement, or to increase NSP payments to full NSP levels. Value must be calculated in accordance with required payments and alternative options.
6. One crucially important element of the system is that it will not be possible to inherit a new state pension from a civil partner or spouse. Widows may be entitled to an extra state pension in certain circumstances.
7. In the case of divorce, clients will retain their NSP but may gain or lose an extra state pension.
8. New state pension entitlement can be increased by deferring payment, at a rate of 1% for each nine-week minimum period. Over the course of a year, this adds up to 5.8%.
9. Self-employed clients will also have full NSP entitlement, in accordance with their National Insurance contribution records. The exact implication of the NSP reforms will be determined by the circumstances and/savings goals of each client independently.
For more information on the new state pension or any matters relating to your own savings and retirement, get in touch with the Haven IFA team today.