Last year, it was estimated that up to 850,000 eligible households were not claiming Pension Credit, with £1.7 billion of available Pension Credit going unclaimed.
How Pension Credit Works
Pension Credit is a benefit you can claim to top up your income if you’re over the State Pension age and struggling to cover costs.
It is made up of two parts:
Guarantee credit – the main body of Pension Credit, which tops up your weekly income to a minimum amount
Savings credit – which is a small top up for those with modest savings for retirement, such as in a personal or workplace pension
You might qualify for one of these or for both parts.
To claim Pension Credit you must have already reached State Pension age (as must your partner if you’re in a couple) and live in the UK.
What You Could Get
When you apply, your income will be calculated, and if you have a partner, your joint income will be calculated. Income includes:
Any pensions, including the State Pension. If you have deferred your State Pension or haven’t yet claimed a personal or workplace pension you’re entitled to, the amount you would get under it is counted as income
Any income earned from employment or self-employment
Most social security benefits, though not all benefits are counted as income. You can check the government website for more information on this
Pension Credit tops up your weekly income to the total of £201.05 if you’re single, or your joint income to £306.85 if you have a partner. You may get more if you:
Have a severe disability
Care for another adult
Are responsible for children or young people under age 20 who are in education or approved training
Have housing costs
To qualify for Savings Credit, you must have reaches State Pension age before 6th April 2016. For this, you can get up to £15.94 a week if you’re single, or up to £17.84 a week if you have a partner.
If you have over £10,000 in savings, every £500 you have over this amount will reduce your Savings Credit by £1 a week.
Click here to use the government’s Pension Credit calculator to see how much you could qualify for.
Other Perks of Pension Credit
The average Pension Credit award is worth over £3,500 a year, and it opens doors to other benefits too.
“even those only due thruppence from it should still claim as Pension Credit is the key gateway benefit that opens the door to many other entitlements.”
If you claim Pension Credit you’re eligible for other benefits, such as, but not limited to:
Council tax reduction
A free TV license if you’re over age 25
Warm home discount
Cold weather payments
Free NHS dental care
Housing benefit
by Red Star Wealth
More and more UK adults are adopting a gradual approach to retirement. In this blog, we will analyse findings from a 2022 study conducted by Smart Pension to gain an insight into changing attitudes towards retirement in the UK.
Thinking About Retirement
Since the introduction of auto-enrolment in October 2012, many workers automatically save into a pension without consciously having to make the decision to do so. This has helped to get a lot more people saving for retirement.
However, it’s still important for us to actively think about our pension and to try to maximise contributions where possible, as our pension pot will need to last us a significant length of time.
Lack of Understanding Surrounding Retirement Options
According to Smart Pension’s 2022 study, 29% of UK adults don’t have a clear understanding of the options available to them in retirement.
This figure is down from 39% in their 2021 survey, reflecting positive change in terms of how we understand our retirement options.
However, there is still a significant gap in our nation’s pension knowledge that needs to be filled.
Retirement as a Gradual Process
Smart Pension also found that retirement is now seen as more of a gradual thing, with 47% of UK respondents seeing retirement as a transition rather than a one-off event.
This makes sense, given that going from working, especially under full-time hours, to not working at all, can be an enormous lifestyle change that could seem jarring. Therefore, more and more people are reducing their working hours as a way to gradually phase in retirement.
Concerns in Retirement
The above image illustrates Smart Pension’s findings on respondents concerns about retirement.
In 2021, the biggest concern of UK respondents was having to limit their lifestyle in retirement, whereas in 2022, being able to afford daily living costs was the biggest concern. This demonstrates the impact that the continued cost-of-living crisis is having on the UK population.
Another interesting point in these findings is that in 2021, being able to afford healthcare costs in retirement was at the bottom of the list of concerns at number five, whereas in 2022, this concern leapt up to third place.
Given that we are a nation with a free national healthcare system, this is somewhat troubling, as it may link to our increasing uncertainty surrounding the future of the NHS, with many being forced to seek private treatment due to lengthy waiting times.
Supplementing Income
18% of respondents plan to supplement their pension with continued employment. Perhaps one reason behind this comes down to that earlier finding, where many are worried that they won’t have enough income in retirement to cover day-to-day living costs.
We can access most private pensions from age 55, meaning that there isn’t really a set retirement age; you can keep working for as long as you like whilst also drawing on your pension.
However, if you do continue to work whilst drawing a pension, you will lose more of your pension in tax. This is because income from your pension is treated the same as any other income, meaning that once you have used up your personal allowance, the rest of your income will be taxed in the relevant band.
The personal allowance is £12,570, so if you work whilst drawing from your pension, and the total income is below this level, you will not be taxed.
It’s worth noting here that you can’t start claiming your State Pension until you reach the State Pension age.
If you are considering phasing your retirement but aren’t sure of the best way to take your pension, or if you aren’t completely sure about the different retirement options available to you, you may wish to talk to a financial adviser. We offer confidential, personalised pensions advice if you wish to contact us at office@redstarwealth.co.uk or by ringing 01253 486346.
by Red Star Wealth
Jeremy Hunt’s decision to scrap the pensions lifetime allowance, announced on Wednesday 15th March during his Spring Budget, has been met with controversy.
What was the Lifetime Allowance?
The lifetime allowance previously capped the amount that individuals could save into their private pension before incurring a tax charge. Previous to the Spring Budget, the lifetime allowance was set at £1,073,100, with expectations that Hunt would increase this figure to £1.8 million. However, in a surprise move he instead decided to abolish the lifetime allowance completely.
For most lower and middle earners, the scrapping of the lifetime allowance will not affect them. This decision will mainly affect higher earners as these tend to be the people who can afford to build bigger pension pots.
“It is a pension tax reform that will stop over 80% of NHS doctors from receiving a tax charge and incentivise our most experienced and productive workers to stay in work for longer”
“I have listened to the concerns of many senior NHS clinicians who say unpredictable pension tax charges are making them leave the NHS just when they are needed most”
The decision to scrap the lifetime allowance is aimed to keep people close to retirement in the workforce for longer, as well as encouraging those who have already retired to return to work. This is because there is more incentive for employees to stay in work to continue building their pension as they won’t face tax penalties for doing so. The idea is that this will help stimulate economic activity and produce economic growth.
Criticism
However, this decision has been met with controversy, with some arguing that whilst these changes would indeed combat the issue of 55% tax penalties faced by doctors, they would also give a big boost to many wealthy people.
David Brooks, head of policy at Broadstone, has argued that scrapping the lifetime allowance and increasing the annual pensions contributions has acted as a “huge tax giveaway to the wealthiest people in the country”
The following images is taken from the director of the Social Market Foundation, James Kirkup’s, twitter:
Perhaps the government should be focussing on getting more people to start building pensions, rather than helping those with large pensions make them even bigger.
Shadow Chancellor and Labour MP, Rachel Reeves stated:
“The only surprise in the budget was a huge handout to the richest one percent of pension savers […] Labour believes that the tax burden should be shared fairly. That is why I’ve announced today that Labour will reverse the changes to tax-free pension allowances. It is the wrong priority at the wrong time”
Given that Labour is favoured to win the next general election, it is a real possibility that Hunt’s scheme may not be in place for very long…
To read more about other changes announced in the Spring Budget, check out our previous blog.
by Red Star Wealth
Scammers have various ways of getting you to depart with your pension, and once you make that transfer, your retirement money is gone. Scammers can be very hard to spot; they know exactly what they’re doing. Let’s explore how you can protect your pension and reduce your risk of falling victim to these scams…
Warning Signs
Cold calling- since January 2019, there has been a ban on cold calling about pensions. Unless you’ve asked a company to contact you about your pension, they are not allowed to. So, if someone tries to get into contact with you out of nowhere regarding your pension, steer clear!
Claiming to know ways of avoiding tax or saving on tax- yes, tax can be frustrating, but it is there for a reason. We are sorry to say that there’s no loopholes here!
Promising limited time offers or one-off investments- if it sounds too good to be true, it probably is
Offering a loan or cash back from your pension- don’t be tempted by the promise of cold hard cash. It’s false
Rushing you to make decisions- take a step back and question why you are being rushed. If they are legitimate, why would you need to make a decision so quickly about money you’ve been putting away for decades?
Getting you to download software or apps- scammers may do this to gain remote access to your devices in order to access things like your bank details
Free pension reviews- as one of the most popular pension scams, this sounds harmless but it won’t end up being just a review at all
Claiming to help you access your pension before age 55- you cannot do this without ending up with a very high tax bill from HMRC
Offering complicated investment schemes- a good rule to follow is that if you don’t understand it, don’t do it
Putting your money into a long-term investment- scammers may use this tactic as you wouldn’t necessarily notice for years that there is something not right
Suggesting you funnel all of your pension pot into a singular investment- the investments most scammers persuade you to buy into are incredibly high-risk, meaning you risk losing all of your retirement savings. Most regulated financial advisers will suggest diversifying your investments to reduce risk
Protecting your Pension
Many pension scammers have convincing websites and online presences to make them seem like they’re legitimate. This is why it’s so important to take extra precautions with your pension.
Check the FCA register to check if they’re legitimate
Check the FCA Warning List to see the risks associated with a potential investment
Talk to a regulated financial adviser before transferring your pension
Check it isn’t a clone firm. Some scammers pose as legitimate firms by using their name but different contact details. Make sure you use the contact details which are on the FCA website to ensure you don’t fall into this trap
If you think you’ve been scammed, contact your pension provider to see if they can stop the transfer if it hasn’t taken place yet
Your pension pot is made up of your hard-earned money, so why risk losing it all? Take these precautions and watch out for scammers! If you have been a victim of a pension scam, contact Action Fraud to report it.
Click here to learn more from our sister company about protecting yourself from financial scams.
