Basic state pension increased in Autumn Statement27 November 2015 Back to results
Overall, the Chancellor George Osborne’s Autumn Statement was positive for pensioners, although slightly disappointing for some pension savers. There are also a few things everybody will have to watch out for.
Basic state pension rises
The Chancellor bumped the basic state pension up from £115.95 to £119.30 a week. As a result, if you’ve reached state pension age before 6 April 2016, you’ll get an extra £3.35 a week. Our budget analysis page outlines this and all of the other key points.
This represents an increase of 2.9% and the government has committed to maintaining its 'triple lock' guarantee until 2020 meaning that, until then, the basic state pension will rise every year by the highest of: inflation, earnings, or 2.5%.
Details given on new single-tier state pension
George Osborne also shed some light on how much you’ll get if you reach state pension age on or after 6 April 2016. From that date the new single-tier state pension comes into force for new pensioners and the Chancellor set the maximum weekly amount at £155.65 for 2016/17.
The amount you’ll actually receive depends on your National Insurance (NI) contributions record and whether you've been 'contracted out' and paid lower NI contributions or paid these into a workplace or private pension scheme.
Timing changed for auto-enrolment contributions
Although the basic state pension is going up, workplace pension savers took a future hit. Under auto-enrolment legislation employer and employee contributions were due to rise from 2% to 5% of qualifying earnings in October '17 before increasing to 8% in October '18.
But the increases have been pushed back by six months to align them with tax years and they'll now take place in April '18 (5%) and April '19 (8%) respectively. Some employers may welcome this delay but it means many people will be contributing a tiny 2% for the next two and a half years.
These are of course the minimum contributions; employees and their employers can pay in more voluntarily to provide a more generous income in retirement.
Stamp duty up for buy-to-let investors
Another issue of note is for those who believe property is a better way to save for retirement than pensions. Osborne announced a 3% hike in stamp duty on buy-to-let properties. In a previous blog I discussed the potential pitfalls of property investment when it comes to generating an income from your pension pot. As with any investment you need to make sure the numbers add up as the stamp duty rise puts more pressure on the returns available from property by increasing the cost of your investment.
Changes to state pension credit payments while abroad
If you’re in receipt of the state ‘pension credit’ and planning on travelling overseas for more than four consecutive weeks after April 2016, you may have a little less foreign currency to spend. Pension credit is a means-tested top-up that people above state pension age can claim if their income is below £151 a week (£230 a week for couples). Currently, this is paid for 13 weeks for claimants’ temporarily overseas, although Osborne is cutting this back to four weeks.
On a final note it was pleasing to hear the chancellor say he was going to bring the digital revolution to Whitehall. As a business, Aegon is firmly committed to offering digital pension services that create convenience for customers while empowering and educating them at the same time.