Money Issues in the year ahead
You recognise the value of retirement planning and arrange your financial affairs as carefully as possible. Yet with certain regularity, changes in government policy and legislation are likely to reshape the financial background.
Looking to this year ahead, therefore, an article published by Kent Live on the 16th of December (citing information from Age UK) shone the spotlight on some of the significant changes you may encounter in the year to come:
Your State Pension
- in his Autumn statement of 2018, the Chancellor promised that basic State Pensions along with new State Pensions would increase by 2.6% - earning an extra £3.25 and £4.25 a week respectively;
- the increases come into effect on the 6th of April 2019 and take the value of the basic pension to a weekly minimum of £129.10 (up from its current £125.95) and the new state pension to £168.45 (currently £164.35) – increases of £164 and £213 a year respectively;
State Pension age
- in the longer-term, there are plans for an increase in the State Pension age for both men and women to 66 by 2020 and then to 67 by 2028 – together with reviews of the state retirement age at least every five years;
Private pensions – lifetime allowance
- there is a cap on the maximum amount you may receive from your pension schemes – whether you receive the pay outs as retirement income or in lump sums – before you become liable for additional income tax;
- it is called the lifetime allowance and, for the new tax year beginning in April, is being increased to reflect movement in the Consumer Price Index (CPI) to £1,055,000;
Auto-enrolment pension contributions
- under existing rules on auto-enrolment pension schemes, employers must contribute a minimum of 2% of the employee’s salary and the employee 3%;
- from the beginning of the new tax year in April, the minimum rates of contribution rise to 3% for employers and 5% for employees;
- your personal allowance – income you may earn before it is liable to income tax – rises from the current £11,850 to £12,500 from April;
- basic rate taxpayers continue to pay that rate up to £34,500 in earnings, but the next step up to a higher rate of income tax has been increased from its current £46,350 to £50,000;
Minimum wage rates
- both the National Living Wage (NLW) and National Minimum Wage (NMW) have been increased with effect from the 6th of April – with the former rising from £7.83 an hour to £8.21.
These are just some of the changes affecting the financial environment in which you continue to plan for your retirement. Many are relatively minor changes, of course, and some might not affect you at all.
But the examples of decisions taken this year by the government may help to illustrate how the environment is changing all of the time and the adjustments you might need to make to your own financial planning as a result.
* The data used in this article is correct as at the time of writing.