22 April 2013

Since 6th April you're better off...

....probably - since the personal allowance for income tax has increased by £1,335 to £9,440. That increases the amount of your income which is not subject to tax, and means you pay £267 per year less tax (if you have an annual income higher than £9,440).
Lots of people say they can't afford to save, but saving is mostly about small regular sums, so why not put that into a savings account as a start? It equates to £22.25 per month.
The headlines from the recent Budget included 1p off a pint of beer. To get the same benefit from that as from the personal allowance increase, you would have to be a drinker of 27,600 pints each year!

18 April 2013

Annuity Rates Increasing?

The latest MGM Advantage Annuity Index shows that average annuity rates have actually increased by 3% in the first quarter of 2013.

That's the first increase for two years!

To demonstrate how bad things have become, here's a comparison of an annuity purchase this year and in 1998, with a sum of £50,000:

March 1998: £4,885 per year
March 2013: £2,875 per year

Equally amazing is that you would expect to live 3 years longer if you are 65 in 2013 than someone who was 65 in 1998.

For advice on the best approach to getting an income in 2013, get in touch:

15 April 2013

Flat Rate State Pension Confusion

Although we gave our view that the new flat rate State Pension was basically a good thing (see our previous blog from January), there are still some significant unknowns about it. Here are some (thanks to Investors Chronicle).

Firstly, Pension Credit (which currently tops up a low pension income on a means-tested basis) will not exist in the new system. Some people will therefore be worse off than they would have been. Will there be any transitional protection to reduce the pain? The DWP Select Committee thinks we should know.

Secondly, under the present system you don't have to take your State Pension at SP age. You can defer it and receive a higher amount later - which is sometimes a good financial planning strategy. We don't know whether you will still be able to do this in the new system.

Thirdly, where women were relying on their husband's National Insurance contributions to give them a Basic State Pension entitlement, they will not be able to do the same with the flat rate system. Should women within 15 years of State Pension Age be allowed to retain this right, since they will not have enough time to do anything about it?

Finally, here's some key fact about the new system:
  • It comes into force on 6th April 2016
  • Men born on or after 6th April 1951 will collect their SP under the new system.
  • For women it's those born on or after 6th April 1953
  • You need 35 years of NI contribs for a full entitlement (currently 30 years)

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