Archive for the ‘State Pension’ Category

Women lose out in new pension reforms

Experts have warned that many married women could lose out under the proposed reforms to the state pension being planned for 2016, says the Financial Times.

At present, married women can qualify for state pension based only on their husbands’ National Insurance contributions – but that will change from 2016. After that, only women who have paid the ‘married women’s stamp’ will qualify for state pension.

If you reach retirement age before 2016, the changes won’t affect you. Married women who will reach pension age later and haven’t paid National Insurance should get advice on their situation.

Steve Clark

Silver inflation is on the up

Rising costs of fuel and food have greater impact on the elderly and the young.

So the imminent rise in inflation – partly the result of the decline in the value of the pound – means pensioners will see their cost of living rise faster than others.

Alliance Trust calculates that the ‘silver’ inflation rate for people over 75 is now 3.2% against the 2.8% rate for under-30s, who benefit more from falling prices for gadgets and clothes.

Age UK do a similar index and the level of inflation is above that recorded by the Retail Price Index or Consumer Price Index. That’s a really important point for those in receipt of an index linked pension to note.

You actual rate of inflation is likely to be higher than any index that your pension is pegged to.

Steve Clark

Local Govt Pensions–give a little and take a lot?

The recent change to the state pension scheme could be bad news for employees and most employers who participate in the Local Government Pension Scheme, 

Here’s the rub. The explanation is going to get a wee bit complicated – but I guess that this being an article on pensions it goes with the territory.

What’s the problem?

Sometime before 2017 contracting out of the State Second Pension will stop. No one is exactly sure when but that is par for the course with some of these changes.

When this happens it means that employees who are members oCoins-graph-upf pension schemes like the Local Government Pension Scheme will pay more National Insurance.In today’s money that extra will work out at 1.4% of their earnings between £5,564 and £40,040. In return for paying more the employee will get their service counted towards the new single-tier pension of £144 per week that was announced recently.

Do higher contributions mean higher benefits?

As you might imagine nothing is ever straightforward on planet pensions. In pension terms we are kind of looking at an apple and a pear.

However, fear not; our friends at the Department for Work & Pensions seem to think that employees will benefit. Their white paper claims that around 90% of all contracted-out employees will be better off in value terms.

We can probably safely assume that the 10% that don’t benefit are the higher earners.

The straw and the camel

Clearly, there’s a danger that this could be the last straw for some employees when these higher outgoings come at a time of increased household bills and zero pay rises.

Members have already been asked to pay more towards the Local Government Pension Scheme in recent years. Higher earners will pay more for their benefits from next year. Some members are already considering opting out to boost their take home pay in tough times.

So I’m not entirely convinced that the DWP are right when they say that employees will benefit from these changes. What about those that can no longer afford to be a member and opt out or those who will opt to join the less generous 50/50 Scheme (as and when it appears).

What about Employers?

It’s worse news for Employers I’m afraid. Employers will end up paying 3.4% more in National Insurance.

In the Local Government Pension Scheme the Employers are unlikely to be able to pass this extra cost on to members. So it must be passed down to council tax payers (if the Employer is a Local Authority) or met from further efficiencies .

But what about those Employers that are Admitted Bodies to the Local Government Pension Scheme? Where can they find the extra cost?

Many Admitted Bodies are signed up to long term contracts that were negotiated without an allowance for this extra charge. Traditionally, membership of the Local Government Pension Scheme is high amongst employees of these Admitted Bodies. So this is  going to hit them hard.

Could we see some outsourced contracts being in jeopardy? If not, then some form of cost cutting and possible redundancies would seem likely.

Is there some stability on the horizon?

Probably not. Having been in the industry for over 25 years I can’t recall a period where there has been anything other than constant change. One thing is clear though all Employers – and especially those Admitted Bodies in the Local Government Pension Scheme – need to keep an eye on the horizon to make sure they know what’s on the horizon. As I’ve said more than once on this blog over the last two and a half years – watch this space.


Steve Clark

Pensions in 2012–A Summary

Well 2012 has got off to a great start here at 44 Financial. We’re working with a number of individual clients on their retirement options as well as three different new corporate tenders. What a fantastic start to the Olympic year!

Conscious as ever that there is so much going on in the pensions world we always try to look out for great articles and documents that will help our clients and blog subscribers to keep up to date. Sometimes its just enough to know what’s going on at a general level so you can decide how much you need to delve into the detail.

To that end we are grateful to those legal types at SNR Denton for their Pensions 2012 article. You can click through to the article here.

As a list to know what you should be keeping an eye on it’s great. There’s brief sections on Auto-enrolment, the abolition of contracting out, gender pricing of annuities.

We hope that you find this useful. As ever if you would like to look at the implications of any of this for your own arrangements please contact us. You can click here to complete our enquiry form.

We’d love to hear from you.

Steve Clark

Back to School–Your Pensions Homework

It’s very difficult to keep up to speed with all of the issues that will arise on planet pensions in 2012.

To help your revision Eversheds have produced a really helpful Speedbrief that covers all of the main issues that lie ahead for us in 2012. You can click through to it here.

There’s no exam at the end of this homework. However, we hope you’ll find this summary useful.

Steve Clark