If you’re approaching retirement age, you may be one of the many people who have questions about the recent changes to the state pension.
So what are the changes to the new state pension and how will they affect you?
If you reach state pension age after 6th April 2016 you will get the new state pension.
The new state pension replaces the old basic and additional state pensions with a flat-rate, single-tier state pension.
This change aims to simplify the whole state pension system, but there are also a few other key changes that you need to know.
How much state pension will I get?
A full state pension will now be £155.65 per week, but whether you receive the full amount will depend on your National Insurance record – you’ll usually need at least ten years on your National Insurance record to get any state pension, and to receive the full state pension you’ll need 35 years’ worth of contributions (this was previously 30 years).
If you are aged 55 or over you can call the department for working pensions to receive an estimate of how much state pension you’re likely to receive and the Money Advice Service also offers a great pension calculator to help you work out what your retirement income is likely to be.
What can I do if my state pension isn’t likely to be enough?
Budgeting becomes increasingly important as you approach retirement; your income is likely to drop significantly and you’ll need to make important decisions about financial management.
Start by gathering together as much information as you can on what your retirement income is likely to be (remember to include your predicted state pension income, any private pension income and any other investments) and then consider what your outgoings are likely to be – will you still have rent or mortgage repayments to make?
Will you have any other outstanding financial commitments or debt? If your likely income doesn’t cover your likely outgoings there are a few things you can do:
Increase your retirement income and reduce your outgoings
If you currently have a decent amount of expendable income, consider increasing your private pension pot or taking out other strong investments. You can also look to increase your current expendable income, and therefore investment potential, by reducing your outgoings.
Comparison websites for utility providers and any sort of financial products such as insurance policies can be a great money saving tool and could help to reduce your outgoings both now and, if you continue to use them regularly, in your retirement.
If you have debt, it’s important to clear as much of it as possible before you reach retirement age. Interest on car loans, credits cards and any other finance agreement is an additional cost that will have a huge impact on your monthly outgoings in retirement.
If you have significant debt you might want to consider cashing in what is most people’s largest financial asset and downsizing to a smaller property. Even if you rent, rather than own, moving to a smaller property could have a huge impact on your finances, both in terms of monthly rental and in running costs and maintenance.
If you own a property, downsizing will not only reduce your monthly outgoings, it could also release a significant lump sum which can be used to pay off debt or to invest to increase your monthly retirement income.
If you’d like to explore the idea of downsizing, Quick Move Now could buy your property in as little as seven days. For more information call Quick Move Now’s friendly, professional team now on: 0800 068 3366.