It is very important to stay ahead and aware of the massive changes to state pensions coming in 2019/20. These changes mean people could receive more money next year depending on their personal situation.
The government have revealed what the new basic and single-tier state pension rates will be as of April 6.
State pensions are a weekly payment from the government which are received once a person reaches retirement age, which is currently 65 for men and women.
In order to qualify you need to have made National Insurance contributions.
Those in receipt of a state pension will get a welcome financial boost – but not everyone will be eligible.
According to the Daily Post, anyone who reached state pension age and qualified before April 2016 will be receiving the basic state pension as well as any additional state pension they may have built up.
Anyone who hit state pension age after April 2016 will instead receive the new single-tier state pension.
A number of state pension age rises are due in the future, with increases to 66 (2020), 67 (2029) and 68 (between 2037 and 2039) planned.
Advice website Which? have outlined how much people will receive when the changes come in next year.
Basic state pension rates
Those receiving the basic state pension will get a weekly boost in 2019/2020.
Recipients will get an extra £3.25 a week, increasing the state pension from £125.95 to £129.20.
Retired workers in this group will then have £169 more for the year, which works out as an annual income of £6,718.40.
New state pension rates
It’s also good news for those entitled to the full new single-tier state pension.
Those receiving this will see an increase from £164.35 to £168.60 – which means an additional £4.25 a week.
That’s £221 extra by the end of the 2019/2020 tax year, which raises the total annual income to £8,767.20.
Additional state pension rates
“If you reached state pension age before April 2016, your state pension will be made up of two parts; the basic state pension and the additional state pension – sometimes referred to as the second state pension,” revealed Which?
The additional state pension only increases by the rate of CPI inflation, which was announced in September, rather than being linked to the triple lock guarantee.
This means that the additional state pension will increase only by 2.4% from April 2019.
There remains a cap on the maximum additional state pension you can earn, though this rises from £172.28 per week to £176.41 per week in 2019/2020.
This means-tested benefit is awarded based on earnings, and from April 2019 both pension credit payments will rise by 2.4%, the CPI rate of inflation.
Guarantee credit, the first part of pension credit, will subsequently increase from £163 a week to £167.25 per week for a single person and from £248.80 to £255.25 for a couple.
The second part, savings credit, will see its cap rise from £13.40 to £13.72 for a single person, and from £14.99 to £15.35 a week for a couple.
Personal lifetime allowance
The pension lifetime allowance is the maximum amount that you can put into your retirement savings without being taxed.
It increases based on the rate of CPI inflation, which means that from next year, the pensions lifetime allowance will increase from £1,030,000 to £1,055,000.
According to Which?, this means an extra £24,800 in tax-free pensions savings that you can make.
Should you be looking to manage your own lifetime allowance, have a look at our new Lifetime Allowance Coach which is available only through Capital Wealth Partners.
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