What is the State Pension?
The state pension is a weekly income paid by the government from state pension age. (You can check your state pension age here: https://www.gov.uk/state-pension-age). The new state pension (applicable for those reaching state pension age from the 6th April 2016) will provide a maximum weekly payment of £175.20, however this is dependent on your national insurance contributions. For those with less than 30 years of NI contributions, this figure will be lower. In order to confirm your entitlement to state benefits in retirement, a BR19 form can be submitted. Our advisers can assist you with completion of this document along with advice and guidance on the information received.

Will I pay tax on my State Pension?

The simple answer to this is yes. The state pension is subject to income tax at your marginal rate. Of course, if your earnings still fall below the personal allowance (including the income from your State Pension) then no tax will be payable.

Why is my State Pension not enough to live on?

In recent times, the government have been attempting to make people aware that we will need to provide our own funds to supplement our income in retirement. The impact of rising welfare costs and people generally living longer has resulted in an ever increasing savings gap (the shortfall of pension funds).

As a full state pension will still only provide income of £9,110.40 per annum, for the large majority this alone will not be enough to manage financially in retirement. Due to this, we must all consider alternative ways to provide income in retirement. Our experienced advisers can assist you with bespoke retirement planning through a variety of savings vehicles tailored to your own circumstances.

Do I have to take my state pension?

Many of us have enough additional income in retirement to not necessarily need our state pension and many wonder if there would be a benefit to deferring the state pension until later in life. The new state pension can be deferred, however the annual pension only increases by 5.8% for every year deferred. Due to this you would need to live significantly longer to benefit from this. It is generally understood that the only people who will benefit from deferment is those who are still working as the state pension is taxable and therefore it may be more beneficial to wait until retirement as you may pay less tax depending of your annual income at this point.

All of our advisers are well versed in the rules regarding taxation and can provide detailed advice on the best course of action based on your current and expected future circumstances.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. It does not constitute advice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor. 

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority. 

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