Why Bring The State Pension Reform Changes Forward A Year?
George Osborne recently announced that the reform for the new Single-Tier Pension System was to be introduced a year earlier than anticipated, sparking huge debate between MP’s, employers, employee’s and current pensioners on the risks that could envelop.
One thing that is certain is that in our current economic state, one cannot overlook the importance of saving for the future.
The new, simple pension system that Mr Osborne has been discussing is the government’s answer to the heavily anticipated reform of the state pension.
From April 2016 the basic pension of £107 a week, plus other means-tested benefits, will be increased to a flat rate of £144 a week.
This was originally scripted to come into place in 2017, but in bringing the date an entire year forward, this raises a number of questions; what are the real intentions behind this reform, the long and short-term effects and how will this affect you?
With so much emphasis on saving for our future, it is always worth acquiring the services of a reputable and specialised financial advice firm.
Saving for your pension can be an overwhelming and confusing process, which is why a specialist pension planner will take the time to sit you down and take you through how you can make the most out of your retirement fund.
Why Has The Date Been Brought Forward?
The thinking behind bringing the reform forward by a year is that, in the short term, more people will be able to receive more money from their state pension.
This is particularly good news for the self-employed, and women and carers who have been low earners or suffered gaps in employment.
What Are the Concerns?
Obviously, only a number of people will qualify when this new reform comes into place and the fact that some 40 million people of working age will be affected by the changes.
Whilst the single-tier state pension provides a simpler end result, the transition period will be considerably longer and more complex as people begin to adhere to the new changes.
If the government gets this wrong there is the risk of the private sector suffering final salary pension closures.
Similarly, businesses can lose a significant rebate from the end of contracting-out, alerting them to question the continuation of such pensions.
Why The Big Debate?
What MP’s are arguing is that more information and understanding needs to be available so that people understand how the new system will work and whether or not they are eligible.
What needs to be understood is that pension funds will take time to adapt to the new changes and require flexibility.
More directly, it is important that millions of current pensioners are not overlooked who may be struggling to meet ends mean on the current state pension.
What the government is aiming to achieve is a simpler fairer state system which helps people to save and plan for the future.
What has been described as a ‘cavalier’ attitude by some is simply a way of highlighting that such a change to our state pension system should not be rushed.
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