Changes, which have been occurring to the pension tax scheme since 2010, could see over £5bn in costs from the UK public every year until 2035. The discovery was made by the government watchdog, OBR (Office for Budget Responsibility), earlier this month. The changes, originally brought in through George Osbourne from 2010 onwards, would mean that those paying into the State Pension now, may be paying more and receiving less in the long run of their careers. The watchdog also found that for those in labour-focused jobs, they would be able to retire earlier than those in higher paid jobs, and would receive more from the government state pension in the long run. This is due to more labour intensive jobs, such as welding and building, are more likely to see people retire earlier rather than later, where desk jobs, which are linked to university student roles, will see the workforce working for longer.
The watchdog also found that for those on a high-wage, private pensions are becoming less desirable. This is due to the amount of tax needed if you wish to place more than £25 000 in your fund annually. This hefty tax has made an increasing amount of people reduce their private pension pots by saving the money themselves in savings accounts. It’s unsure which percentage of the UK is doing this, however, a rise in people retiring early is thought to have encouraged a drastic change in policy since 2010 – which ensures that those wishing to retire early see less money each week.
A spokesperson from the Treasury has stated that they want people to save for their pension in a way that benefits them personally. They have also stated they will change policy according to how people in the UK prepare for their pension overall. If the government is aware of people saving money of their own volition, surely they should understand that the people of the UK are unhappy with their current pension options.
This pension tax news comes after the BHS (British Home Stores) fiasco, where after the liquidation of the company, a £600m hole in their pension funding came to light. This meant that workers would not receive a penny of their pension from BHS, despite making donations from their pay. Investigations are still underway for those workers who have felt cheated by the company after years of service.
The news also comes after a survey, released this month, concluded that workers will now be allowed to retire at 60 – but only if they agree to take a lower weekly amount. Those expected to receive £155 a week on the national State Pension should expect to take a lower £120 in order to retire a few years earlier. This, as well as the fact that the retirement age is due to be raised in coming years, is spelling disaster for the UK pension fund and scheme. Those currently in their 20s and 30s are feared to only be allowed retirement at the ripe age of 70. Many are saying that this is unacceptable and that the government needs to come up with plans to change this outcome. No comment has been made from the treasury about this news as yet. With news like this, it is no wonder that people of the UK are scared for their future and the future of their pension. Brexit has not come into effect yet, however many people fear that once article 50 is invoked, the pound will finally drop below that of the euro and dollar, spelling disaster for the future of the UK pension scheme. If this happens, the UK government will have to start cutting down on policies which they believe are redundant. Therefore it’s no suprise that there are rumours of scrapping the State Penion in years to come.
The future is definitely uncertain when it comes to the future of the UK pension fund. A spokesperson for the treasury is yet to comment on the news that nearly £5bn a year is being ploughed into the pension scheme. If it collapses, what happens to the money of the UK people who have been making contributions for years? It seems only time will tell. Pension credit is for those who have reached state pension age and want to start earning a weekly pension. You can find out more informaion on pension credit by visiting the pension credit page. From here you can find out more information on how to recieve your weekly installments, as well as more general infomration on pension policies by the governement. On this page you will also find information on which number to call if you have a query or question regarding your pension credit.