YOUR STATE PENSION – TIME IS RUNNING OUT

TODAY’S BLOG

YOUR STATE PENSION – TIME IS RUNNING OUT…

When the new State Pension was introduced from 6 April 2016, the Government also provided an easement to the normal six-year window which allows individuals to pay Voluntary (Class 2 or Class 3) National Insurance Contributions (NICs) to fill in gaps as far back as 6 April 2006. However, this easement is coming to an end on 5 April 2023 meaning individuals have a little over nine months to take advantage of this easement. I repeat…

THE EASEMENT TO BACK FILL YOUR NI CONTRIBUTIONS ENDS ON 5 APRIL 2023.

This was picked up in the press:

  • Telegraph (18 June 2022): How to boost your state pension by £55,000.
  • Express (25 June 2022): Pensioners could boost their state pension by up to £55,000 – how you could do it.

The headline grabbing figure of £55,000 is based upon the increase in State Pension following backfilling ten qualifying years, increasing an individual’s State Pension by £52.90 per week and paid for an assumed 20 years from State Pension Age (SPA).

For those of you not yet drawing your State Pension, I regularly remind you to check both your National Insurance record and obtain a proper State Pension forecast. To say that politics has been mucking around with your State Pension would be a significant understatement.  You can also do this via your Personal tax account.

STATE PENSION COUNTDOWN

BEFORE TOPPING UP

However, people considering topping up need to take a range of factors into account. For example:

  • Some years can be ‘cheaper’ to top up than others; for example, people who have worked part-year and have paid some NICs may be able to complete that year more cheaply than buying a completely blank year;
  • Filling blanks for certain years (particularly those before 2016/17) can sometimes have no impact on your State Pension. This is particularly relevant for people who have already paid in 30 years by April 2016 and who were long-term members of a ‘contracted out’ pension arrangement;
  • People who expect to be on benefits in retirement may find that some or all of any improvement in their State Pension may be clawed back in reduced pension credit or housing benefit;
  • People who were self-employed can save money by paying voluntary Class 2 contributions (currently £163.80 per year) rather than Class 3 contributions (£824.20 per year);
  • Before paying voluntary NICs, individuals should see if they can claim NICs credits for a particular year. For example, those looking after grandchildren may be able to claim credits transferred from the child’s parent, and this could be a cost-free way of boosting their State Pension.

THREE KEY GROUPS

There are three groups for whom top-ups may be of particular interest:

  1. Early-retired public servants, or private sector individuals who have been members of a ‘contracted out’ occupational pension scheme; the period of contracting out is likely to reduce their State Pension below the maximum amount, and their early retirement is likely to mean they have ‘gaps’ in their NICs record which can be filled;
  2. The self-employed, who may have gaps in their NICs record and may be able to go back to any year since 2006/07 to top it up; this group is less likely to be affected by complications around ‘contracting out’.
  3. Anyone that took a career break to look after children.

TAKE ACTION:

If YOU haven’t started to receive your State Pension, please do take this as an urgent reminder to check your pension. The State Pension is now roughly £9,660 a year each – which is a guaranteed income for the remainder of your life. Whether you think this is a lot or a little isn’t of concern here – just that you receive what you are entitled to.

For the record, no I don’t think its enough… which is why I do what I do and you pay me to do it.

LINKS:

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

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GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

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YOUR STATE PENSION – TIME IS RUNNING OUT2023-12-01T12:12:48+00:00

TAX TRUTHS – A PARTY OF TAX CUTTING?

TODAY’S BLOG

NEW TAXES CLAIM £50BN AHEAD OF NI RISES

I’m going to assume that you are old enough to know that what a political party says and what it does are not the same thing at all. Here in the UK we tend to vote for the “least bad” option, at least, thats the only way I make sense of it.

New levies imposed on businesses over the last decade have raked in more than £50bn for the Treasury, as the UK’s tax burden rises to its highest level since the 1950s. The bank levy, apprenticeship levy, soft drinks tax and a range of other charges have all contributed to the public purse, according to analysis by Thomson Reuters.

It comes as National Insurance is set to rise in April 2022, adding 1.25 percentage points to the tax levied on employers and on their workers’ pay packets. These new taxes have proven themselves to be a successful way to bring in billions of pounds in a relatively short space of time. The new National Insurance surcharge is sure to be a success from a public purse perspective, but will add considerable financial and compliance stresses to both businesses and individuals.

The extra National Insurance fee, which will be known as the health and social care levy from 2023-24, is set to raise around £17bn per year, outweighing even the largest of the previous new taxes.

Here is a link to NI rates for 2022/23

SOFT DRINKS TAX

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Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

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Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

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TAX TRUTHS – A PARTY OF TAX CUTTING?2023-12-01T12:12:52+00:00

STATE PENSION INCREASE

TODAY’S BLOG

STATE PENSION INFLATION INCREASE

You will have noticed the impact of inflation on various goods and services that you have bought lately. Inflation always hits those on a fixed income harder. That mainly means those that are drawing their pensions.

The ONS publish data about inflation every month, but I suspect your actual lived experience of inflation may differ from the general averages for the entire country. There has been much coverage of this in the news, in particular the real inflation on supermarket products.

You can check the official current rate of inflation here (click here)…. Or you could look at your utility bills.

Retirees in Britain face the worst disparity in their state pension payments when set against inflation since the triple lock was introduced over a decade ago, findings warn. In April 2022, state pension pay-outs will rise by 3.1%, and be based on Consumer Price Index figure from last September. But earlier in the month, new official figures revealed that inflation was running at 5.5% in the year to January.

Pensioners would currently see a real term loss of 2.4% in the amount of state pension income they receive from the Government, and the problem could worsen with forecasts of inflation peaking at around 7.25% in April, according to experts at Quilter.

The basic state pension will rise by £4.25 to £141.85 per week, or around £7,370 a year, in April. The full flat rate will rise by £5.55 to £185.15 per week, or around £9,630 a year. Since the triple lock was launched in 2010, there have only been 22 months when inflation stood above the uprating of the state pension for the previous April and five of those months were in 2021, says analysis by Quilter. The previous biggest disparity was 0.6% back in November 2017, when inflation ran higher than the state pension uprating for 11 months, but only on average creating a disparity of 0.4% over the period.

I have no wish to get political, but I would add that this is a difficult situation for any Government. The number of people claiming the State pension is rising and there are fewer “working” people (paying NI) to cover the cost. This is, to be blunt a timebomb. The State Pension is a political punchbag, in theory paid for by the combined employer/employee or self employed National Insurance contributions.

See the links below (for those not yet drawing a State Pension).

Remember that the State Pension is income and taxable, it is simply that for most people it is within the personal allowance for the tax year (the 0% allowance). The personal allowance for 2022/23 remains at £12,570.

STATE PENSION INCREASE

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?


GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

STATE PENSION INCREASE2023-12-01T12:12:53+00:00

THE AUTUMN BUDGET 2021

TODAY’S BLOG

THE AUTUMN BUDGET 2021

In terms of your personal finance, not a lot has changed. Indeed, most of the announcements merely confirmed previous announcements, such is the way of our politicians. As a reminder, the next tax year begins on 6th April 2022. The main changes for most are really for those that receive dividends or pay National Insurance

iNCOME TAX RATE ON DIVIDENDS 2022/23 2021/22 (NOW)
Basic rate taxpayer 8.75% 7.50%
Higher rate taxpayer 33.75% 32.50%
Additional rate taxpayer 39.45% 38.10%
Rate for Trusts 39.35% 38.10%

National Insurance for employers increases from 13.8% to 15.05% which basically makes it more expensive to employ people. Employees will also pay rather more at the main rate, rising from 12% to 13.25% and then at the upper or higher rate increased from 2% to 3.25%. Remember the thing about National Insurance is that there is a threshold for the main rate after which you simply pay a flat, reduced rate (currently 2% but increasing to 3.25%). The self-employed main rate increases from 9% to 10.25%. Self-employed people do not fully enjoy the same benefits for their NI payments.

MAIN ALLOWANCES

For those of you using your pensions, the annual allowance remains at £40,000 but if you have begun drawing income from investment-based pensions it is restricted to £4,000 the delightfully named “Money Purchase Annual Allowance” or MPAA. The Lifetime Allowance (the total value of your pensions permitted before excess charges) remains frozen as previously indicated at £1,073,100. This is equivalent to a pension income of £53,655.

ISA and JISA limits remain as they were (£20,000 and £9,000) which are fairly substantial allowances but indicate a “kick the can down the road” policy of Government worrying about tax in the future. Capital Gains Tax (CGT) allowances and rates remain as they are (which is daft).

If you own a second property or inherit one, the capital gains rate and requirement for payment are important to understand. However, one small improvement is that you now have 60 days to pay the liability rather than 30 (with immediate effect). I imagine one of Rishi’s friends was offloading and was worried about an extra charge (surely not!).

As for inheritance, the nil rate remains at £325,000 per person and those with children inheriting the family home the residential nil rate band adds a further £175,000. However, this is tapered when an estate is worth more than £2m.

In short, for all the bluff and thunder and 200 pages, not much is in it for you and I. Remember – death and taxes.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

THE AUTUMN BUDGET 20212023-12-01T12:13:01+00:00
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