Pension reforms, you can’t escape them everyone will be affected. Read what it means for you

Basic State pensions increasing to £140 per week for everyone...maybe!

It is at the Green Paper stage. This simply means it is a just a discussion document but it will be very difficult for the Government not to do it following all the publicity the announcement was given so it is good news.

It will also simplify a lot of other things as it should mean the gradual phasing out of pensions credit which can be very complicated.

State Pension Age. The not so good news though is that this will increase to age 66 from 2020 so you will have to wait longer for your higher pension.

Clearly you will need to consider the impact of a delay in a valuable source of income.

NEST is a workplace pension that is being introduced gradually from 2012.

So, if you are an employer that doesn’t currently provide a workplace pension you will probably need to provide your employees with access to NEST. This will cost employers 3% of qualifying earnings. Employees will have to pay 4% and the Government will add 1%.

Employers will have to fulfil a number of duties including:

• Registering register with The Pensions Regulator
• Enrolling employees in the scheme within prescribed timescales
• Keep records staff who opt out for a prescribed period of time
• Give information on pensions to their employees at the point of auto-enrolment. Employers must NOT give advice.

If you are an employee that does not currently have access to a company scheme then this will provide a pension option for you.

Removal of the requirement to buy a pension with your pension pot by age 75.

New options that could mean that you never actually have to buy a pension but just use your fund to withdraw cash to supplement your income.

You may also, if you can prove that you have a minimum level of income for life, be able to take a large part of your pension pot as a lump sum subject to a tax charge.

This is a very complex area and the proposals will make it even more complicated. The need for advice is crucial. There are many things to consider such as state of health, dependants, other investment assets and inheritance tax liabilities to name a few.

If you are interested in how you can benefit from this flexibility you should contact me to discuss your own circumstances.

Public Sector Final Salary Schemes currently use RPI to determine increases in your pension. This will switch to CPI. Historically CPI has increased at a lower rate.

This does not just affect your pension when it is being paid. If it is a deferred pension then it will increase each year up to your retirement age.

This increase will now be less than it was previously. This means that you will receive a lower pension than you had expected.

Private Sector Final Salary Schemes traditionally use the same index so those could be affected too.

It is important that you take advice on the best way to make up this shortfall if you are in a final salary scheme or if you have frozen benefits in a previous employer’s final salary scheme.

There will be a fundamental structural review of public sector pension provision.

The main reason is to save money so it would seem very likely therefore that if you are in the public sector your future pension entitlement could be reduced and you will be asked to contribute more towards your pension.

It would be sensible therefore to have additional sources of income at retirement. This can be provided by vehicles such as a private pension, interest from savings including ISA’s and tax efficient withdrawals from investment bonds.

If you think you may be affected by this review get in touch and I can help you to mitigate any reductions in your public sector pension.