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UK State Pensions
There are two levels, the Basic State Pension and the State Second Pension.
Basic State Pension
This is normally paid weekly and often referred to as the ‘Old age pension’.You can find the current weekly amounts available for the full pension here.This amount is based upon having a full 30 years National Insurance credits. If you have less than that, a proportionate amount is paid, so one years NI gives 1/30th of the pension.
Changes
In line with countries all over the world, successive governments have known for many years that State pensions are too expensive and will become even more so as there are more pensioners and less workers. State pensions have never been funded for so the tax payers of today pay for the pensioners of today.There are many reasons for this increasing problem, including people living longer and the ageing ‘baby boomers’. So, it is not a question of governments wanting to, but having to change.
Key changes to the Basic State Pension coming up are;
- Increase in the age to receive the Basic State Pension to 65 for women, gradually increasing from 60 between 2010 to 2020
- Age increase from 65 for men and women to 68 from 2024 to 2048, again gradually
So, depending on your age, you may have to wait longer for your state pension. Those born prior to 6th April 1950 are not affected.
Issues living abroad
If you are living abroad in many popular destinations, you will not receive an increase in your State Pension from the day it is first paid. Whilst the annual increase last year was only £5, this would have a significant impact over the next 20 to 30 years.Making up for lost time
Whilst you are abroad, if you have not reached the 30 years contributions, you can make regular or single payments to boost your state pension. It is widely recognised as an economical way of boosting your overall pension provision.You can make up National Insurance payments while abroad for up to 6 years after they would have been due. This has been specifically extended to 12 years for people with over 20 years credits, reaching retirement up to 6th April 2015. 90% of those people affected are women.
State Second Pension
Many people know this as the State Earnings Related Pension (SERPS)
or Additional State Pension, but now State Second Pension is the recognised term.
Whilst working for an employer, you may have either paid full National Insurance contributions building up your State Second Pension, or alternatively have paid a reduced rate, meaning the equivalent amount would be paid through your employer’s scheme instead.
If you have your own private arrangements such as a personal pension or stakeholder plan, you can make an individual choice whether you obtain the equivalent of the State Second Pension from your own pension or the State.
The amount of State Second Pension that you are due is calculated and paid at the same time as your Basic State Pension.
Income Tax
All State pensions are added to other earnings for tax purposes and so depending on the level of all income, can be subject to taxation. Your country of residence and your tax position is therefore very important to whether any tax would be payable.
Links
The government gives some particularly useful information on a website which you may wish to browse;
- guide to state pensions www.direct.gov.uk/en/Pensionsandretirementplanning/index.htm
- explanation of countries where increases are made www.dwp.gov.uk/international/
Back to the Pensions home page
Phoenix Consultants Ltd. Administration Centre: 1913 BB Building, 54 Sukhumvit 21 (Asoke) Road, Kongtoey Nua, Bangkok, 10110 Thailand
Tel: + 66 2 664 1265, Fax: + 66 2 261 0919 /29
info@phoenixconsultantsltd.com