The Prime Minister asked if he could tell you about pensions. We said yes (don’t worry, this isn’t us going party political, we’ve had senior politicians from all parties write). So here’s his exclusive blog for us. Yet remember this is his view, not ours.
This Government inherited a pensions system that was confusing and unfair. We are putting that right with the most radical reforms to pensions in a generation. Our older people have worked hard and paid into the system all their lives.
So at the heart of our reforms is one clear aim: to ensure you have dignity and security in retirement. And here I want to explain to MoneySavingExpert.com readers how those changes affect you.
The basic State Pension Triple Lock
For current pensioners, we have committed to increasing the basic State Pension each year by inflation, average earnings or 2.5% – whichever is highest.
This means that next year the basic State Pension will increase by double the rate of prices. And it means that since I've been Prime Minister it will have gone up by £950 per year.
This remedies the unfair increases of the past, where one year people saw their pensions rise by a paltry 75p a week.
The new State Pension
This will come into effect on 6 April 2016 and is designed to make the State Pension clearer to understand for future pensioners, helping them to save for their retirement. If you're a man and were born on or after 6 April 1951 or a woman born on or after 6 April 1953, you will be eligible to claim your State Pension under the new rules.
The full amount of the new State Pension will be at least £148.40 a week, but how much you get depends on the National Insurance contributions you have made.
Today there is a minimum income guarantee so no one has to live on the basic State Pension alone. The new State Pension will be set above that guarantee helping people to save for the future with confidence. Every penny you have saved during your working life, you will keep.
Scrapping compulsory annuities
This gives you complete control over your own money, so you can spend your private pension savings as you wish, and are no longer forced to buy an annuity.
Passing on your pension
When you pass away, you will be able to pass your private pension onto your loved ones tax-free. This means that no-one will ever again have to pay that completely unfair 55% tax on the money they have worked so hard to save.
We are continuing to protect the Winter Fuel Payment, the free TV licence and free bus passes, so that everyone gets a comfortable retirement.
Taken together, these measures are helping to give pensioners the security and dignity they deserve.
Views do not necessarily reflect those of MoneySavingExpert.com.
Related MoneySavingExpert.com information
- Martin's blog: Cancelling the 55% tax on unused pension pots could be a disaster for many older people
- Martin's blog: The Chancellor's pension changes are both wonderful and horrid
- MoneySavingExpert.com guide: Pension need-to-knows
- MoneySavingExpert.com guide: State Pensions