What’s changing with the State Pension Age?

Since 2010 we have seen the State Pension Age (SPA) steadily rise for woman which means that by November 2018, the alignment will be complete and the SPA for both men and woman will be 65.

From December 18, we will see a similar phased approach until October 2020 to bring the SPA for both men and woman up to to 66. But that’s not all.

The Pension Act 2014 will see the SPA rise again from 66 to 67 between 2026 and 2028, earlier than the original planned date of 2034 to 2036.

And currently by 2046 the SPA will be 68 for us all as per the Pension Act 2017!

If you’re unsure of your position during these rises, you can check your state pension age using the SPA Timetable which can be accessed here.

So, how does this affect you?

The obvious answer is you need to work for longer before reaching SPA!

• For those who reached State Pension Age before April 2016, you needed to have National Insurance contributions or credits for 30 years to receive the full pension. There are two parts to the State Pension - the basic state pension (BSP) and the additional state pension (ASP).
• For those of you who will reach your SPA on or after 6th April 2016, the two part State Pension has been replaced and you will need to have a minimum of 10 years National Insurance contributions or credits to qualify for a State Pension. To receive the full pension, you will need to have National Insurance contributions or credits of 35 years. The new state pension is £164.35 per week

Contracting often satisfies those approaching SPA or working after retirement age due the flexible nature of the roles, so we are seeing more and more contractors over the age of 60 being paid through our Umbrella Services or working through their own Limited Company.

How can PayStream help?

With state pension age rising you also have longer to save and plan for your pension.

Contracting often satisfies those approaching SPA or working after retirement age due the flexible nature of the roles, so we are seeing more and more contractors over the age of 60 being paid through our Umbrella Services or working through their own Limited Company.

If you’re an Umbrella employee

We have a workplace pension scheme with Nest. Nest use the leading fund managers such as Amundi, BlackRock, BMO, CoreCommodity Management, HSBC, JP Morgan, Legal & General Investment Managers, State Street Global Advisors, Northern Trust and UBS, and has won various awards.

They have achieved 8.8% annualised returns to March 2018 in the NEST 2040 retirement fund (of course this is historical, and no guarantee of future performance) and they also offer low charges to members as they aspire to operate as a not-for-profit business.

You can transfer you pension in or out of Nest as you change employments throughout your working life as well as being able to make regular or one-off additional contributions though your online account.

You can find out more about Nest here or by logging on to your Nest account if you have one.
https://www.nestpensions.org.uk/schemeweb/nest.html

If you’re a limited company contractor

If you work through your own limited company and you are the sole director and employee of the company then arranging a workplace pension is not a compulsory requirement. However making adequate pension arrangements is still important to provide you with an income in retirement and for that reason many limited company directors will make contributions into a personal pension scheme. If you don’t have a personal pension scheme already a new scheme can be set up, or if you do have an existing scheme you can normally add to this pot.

Contributions into a pension pot can be made directly from your limited company, these would be classed as a trading expense and will therefore receive Corporation Tax relief at 19%. Alternatively, contributions can be made from funds held personally, 20% would be added to the amount paid in, in the form of a tax reclaim to achieve basic rate tax relief, as well as your basic rate tax bracket being extended by the amount of the gross contribution, meaning you can earn more before higher rate taxes would apply. For detailed calculations or any other tax advice related to pension speak to your dedicated accounts team.

There are a whole range of different pension schemes and different investment options available, therefore it is also important to regularly review your pension options with a financial advisor to ensure your pension arrangements suit your individual circumstances.