An overview of pension changes in 2017 so far
September saw the UK’s key inflation rate hit a high of 3% – the highest level since 2012. Although this impacts on everyone from business owners, employees and pensioners, it seems that pensioners may have the biggest cause to celebrate.
With inflation running higher than either wages or 2.5%, this will determine the rise in the state pension next year, arguably making retirees the biggest winners from the recent inflation figure announcement. If you’re unsure of what this year’s inflation announcement means for your state pension, read our Q&A below.
Q – Why the inflation?
A – Brexit! After Britain announced its plans to leave the European Union, the pounds value has fallen, which in turn has seen imports become dearer and impact on the inflation from 1% to 3%.
Q – What is the triple lock guarantee?
A – The government’s triple lock guarantee means the state pension will rise in April each year by whichever number is the highest out of the September CPI inflation number, average earnings or 2.5%.
Q – What will the new state pension be?
A – As of April 2018, state pension payments will rise in line with September’s CPI. Those who receive the New State Pension will see their weekly income rise from £159.60 to £164.38, with an annual income increase of £250.
Q – What about the old basis state pension?
A – Those on the old basic state pension will only see their state pension increase from £122.30 to £125.97 a week, giving an annual increase of only £191.
Q – What does this mean for public sector workers?
A – As Septembers CPI figure is used as the basis for the payments, most public sector workers will see a significant increase in their accrued benefits, as of next year.
- Teachers will get a 4.6% increase (3% + 1.6%)
- NHS employees will get a 4.5% increase (3% + 1.5%)
- Police officers will get 4.25% (3% + 1.25%)
Q – Will business rates be affected?
A – Small businesses will see a significant rise in rates, with as many as 1.8 million businesses paying more. According to the British Retail Consortium, businesses will be liable for an extra £273m from 2018, on top of the rates evaluation in April this year.
Q – Will this alter Lifetime allowance?
A – Lifetime Allowance will also rise by 3%. Currently, if your pension pot is worth more than £1m, you pay a 55% tax charge on any withdrawals on the excess. However, from April next year, you will now be allowed to save an extra £30,000 without paying this tax.
Q – What’s next?
A – It’s difficult to predict if there will be any further changes to those made already this year, but with the Autumn Budget set for Wednesday 22nd November, we can expect to hear the government’s plans for the economy, including addressing pensions, very soon.