A single tier State Pension is being introduced in the UK. It is expected to be around £144 p.w. in todays dollars, based on 35 years of qualifying earnings. The change will only affect people reaching state pension age after 6th April, 2016. Some Australian residents make voluntary contributions to the UK State Pension to increase their number of qualifying years. With these changes, the value for money of that strategy will need to be re-evaluated.
The single tier pension will need a minimum of 7 to 10 years of contributions. The records of spouses or civil partners can't be used. Increases will be earnings inflation. The State Pension age will be reviewed at five yearly intervals based on the principle that the state pension should be received for a specific proportion of an adult's life.
Contracting out of the state second pension will cease for defined benefit arrangements from 6th April, 2016. The abolition of money purchase contracting out happened from 6th April, 2012. There will be provisions to amend contracted out scheme rules to offset the higher national insurance costs.
NetActuary has been summarising many of the UK pension changes and preparing Technical Notes because they have an impact on QROPS transfers. In particular, over recent weeks we have put a considerable effort into enhancement to drip feed strategies.
The NetActuary Team