CHANGES to pensions are coming in April and they could affect how much you have in your pocket.
Whether you’re working and saving for your future retirement, or have already dived into post-work life, here’s the changes you need to know about.
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Many pensioners will get a pay rise thanks to an increase in the state pension.
But it comes at a time of rising living costs, with energy, broadband and council tax bills all set to rise too in April.
Anyone struggling with higher bills or worried about debt can get help.
There are plenty of organisations where you can seek advice for free, including:
Triple lock suspended
The government has suspended the triple lock, a formula used to calculate the annual rise in state pension payments.
The triple lock sets an increase to weekly payments based on the higher of three things: average wages, the consumer prices index (CPI) or 2.5%.
But because the pandemic has skewed figures for wages, making growth far higher than usual, this part has been removed so it’s temporarily a double-lock this year.
Scrapping the wage element of the state pension triple-lock means retirees missed out on a blockbuster increase of around 8%.
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While there’s little you can do about this, when budgeting for the year ahead you’ll need to factor in that you may get less than you expected under the triple lock.
State pension payments increase
Under the double lock you’ll still get a pay rise through your state pension.
It means millions of Brits claiming it are set to be better off by around £5.50 a week.
Anyone claiming the new state pension and getting the full amount will get around £185.15 a week, up from the current £179.60 a week.
Over a year that’s £9,628, up from £9,339 – or an extra £290 overall.
The state pension rises each year, and this year it will go up by 3.1% in line with inflation at September last year.
The exact amount more you’ll get depends on the pension you get, if it’s under the new system or old system, and if you get the maximum amount or not.
You can find out the rates for the new and old state pension here, plus how it’s calculated.
It’s worth checking if you’er getting the right amount of state pension, as an error has lead to thousands of people being underpaid – you can find out more in our guide.
If you’re on a low income then it’s worth checking if you can get extra payments on top, plus other perks.
An estimated one million pensioners are missing out on pension credit – here’s how to check if you’re one of them.
Pension credit rise
Anyone already getting pension credit will see the amount rise in April too.
And if you find out you could be getting the retirement benefit, you’ll benefit from the extra cash too.
Pension credit is for those in retirement and it can boost income and give access to extra perks like a free TV licence.
Pension credit top up your income up to £177.10 a week if you’re single and £270.30 for couples.
The payment will increase at the same rate as inflation (3.1%), to £182.59 and £278.68 respectively.
Even if your income is higher than the minimum weekly amounts, you might still be eligible for pension credit if you have a disability, care for someone, have savings or if you have housing costs.
Many people think it’s not worth claiming because they may only get pennies – but it’s worth getting for the other perks that can save you much more.
The exact amount you can get depends on your circumstances so using a benefits calculator can help you work out how much you could get.
Part-time worker pension boost
Thousands of workers could get a major cash boost to their pension at the same time the national living wage rises.
From April, the minimum wage for those over 23 will increase to £9.50.
This boost will bump some people’s pay over the amount needed to be enrolled in a pension through their work automataically.
Experts say this could be affect thousands of workers, and particularly those who are employed part-time.
Workers need to earn £10,000 a year to be auto-enrolled, though anyone earning slightly less can ask to join.
It could boost their pension savings by up to £4,800 through contributions made by employers alone, which is essentially free cash. And that’s on top of the money they save themselves.
Workers on low income could also get a boost to pensions after a tax-relief loophole closes – but not until 2024.
You could see some of your income going to your retirement fund instead from next month, so it’s something to budget for.
On top of the cash you pay in, you’ll also get free cash from your employer and the government paid in to help you save for the future.
While you can decide to opt out of auto-enrolment (you’ll have to tell your employer if you do), you’ll miss out on this extra cash and could be worse off in retirement.
Flat fees banned on small savings
Hundreds of thousands of Brits will avoid losing pension cash under new rules which also come into effect in April.
Pension pots with only small amounts saved can be eaten up by fees, reducing their value to nothing in the worst case.
But these will be banned on on pots valued at £100 or less for workplace pensions that staff are auto-enrolled in.
It’s estimated that Brits will have around seven different jobs in their working life, on average.
And more than 10 million Brits are now enrolled in a pension automatically through work.
That means many of us now have several small pensions from different jobs.
The change means they will no longer be eaten up by fees – but that doesn’t mean you need to forget about it ass you can still lose cash charges over this amount.
It’s still worth checking if you could save cash through combining your pensions into one pot though, as it could be costing you hundreds of pounds a year.
You need to consider this carefully though as some pensions come with extra benefits that you could lose by consolidating, and check out for exit fee charges too.
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This post first appeared on thesun.co.uk
