Today marks the implementation of the new state pensions system amid fears that millions will lose out. While the self-employed and women who have taken career breaks will be the biggest beneficiaries, many of those in their 20s and 30s will receive less than they would under the old system.
In the biggest shake-up to the state pension since it was introduced more than a century ago, a single tier or flat rate scheme worth £155.65 a week will be introduced. But figures from the Pensions Policy Institute suggest 11 million in their 20s and 30s could be worse off. Other losers include widows. This is because the the top-up scheme known as the state second pension has been abolished.
Now the Institute of Fiscal Studies has suggested that ministers may have misled the public by exaggerating the simplicity of the new state pension. Its analysis says more than six in ten people reaching the state pension age over the next four years will receive less than the £155.65 per week headline rate.
Staying on the subject of pensions, The Times reports that the Financial Conduct Authority has opened a review into pension freedom reforms amid concerns that retiring savers are vulnerable to mis-selling. Having carried out its own survey of the way savers were responding to George Osborne’s pension overhaul, the city watchdog said that it would look at ‘retirement outcomes’ as part of a wider study into the chancellor’s new rules. Under the terms of pension freedoms, introduced last year by the government, the requirement to buy an annuity was abolished and new ways to access pension savings came into force. As in the past, pension holders can still take 25 per cent of their pension pot as a lump sum. But those aged 55 and over can now take the whole amount as a lump sum, paying no tax on the first quarter and the rest taxed as if it were a salary at their income tax rate. The FCA is also to look at the secondary market in annuities that is scheduled to open for business next April, allowing retirees to exchange their annuities for cash. Meanwhile, the fallout after the release of the ‘Panama Papers’ continues and has claimed its biggest scalp yet. After the leak of more than 11 million documents revealing how the rich and powerful hide their wealth, the Prime Minister of Iceland was forced to resign. Documents appear to reveal that his wife concealed millions of dollars worth of investments in offshore companies. The Financial Times reports that HSBC is planning a new investment advice service. The move comes a matter of weeks after Royal Bank of Scotland said it was making 220 financial advisers redundant and that it would focus solely on customers with more than £200,000. HSBC is introducing ‘simplified’ face-to-face investment advice this week, initially to customers with at least £50,000 to invest. It plans to test the service for customers with £15,000 or more in savings later this year. The move will make the bank the first in the UK to offer branch-based investment advice to people with relatively modest amounts to invest. Don’t forget that today marks the start of a new tax year. Among the raft of new measures is an increase in the higher rate tax threshold to £43,000 and a rise in the UK personal allowance to £11,000.
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