Q. I am told that the State Pension is changing and that everyone in future will get £155 per week provided they have enough years National Insurance Credits. Does this mean my pension will change? I am 65 and drew my State Pension last year.
A. No, if your pension is already in payment it will be unchanged, other than the 2.5% increase under the “Triple lock” currently in place. The changes only affect those reaching State Pension Age after 6th April 2016. Although the principle is that new retirees will get a weekly pension of £155.65 per week, and this is dependent on having 35 years of NI credits, there will be an adjustment initially to take account of the old system of contracting-out. Although as one of those reaching the State Pension Age before 6th April you have had your pension calculated on the old basis, you do have an opportunity to buy up to £25 per week extra pension through paying “Class 3A” National Insurance Contributions. To find out how much this would cost, visit www.gov.uk/state-pension-topup.
Q. I have heard that the government has introduced a new non-taxable allowance for savers in cash deposit accounts. As we have large cash savings how will this help us?
A. This was announced last March and takes effect this April. Previously, savings were taxed at either 20% or 40% depending on your rate of income tax. From April 2016 basic rate tax payers will be able to earn £1,000 pa interest in a savings account before being taxed. Higher rate tax payers will be allowed £500 pa. This means that a basic rate tax payer can have around £70,000 in savings before being taxed and half this amount for a higher rate tax payer. You will pay no interest at source, but if you earn more interest than your tax-free allowance it is up to you to declare this to HMRC. It’s estimated that these changes will take 95% of savers out of deposit account tax! With interest rates very low and likely to remain so, then any help here is welcome. The savings are not huge. But if a couple had £105k in savings, and one was a basic and one a higher rate tax payer earning 1.5% pa Interest, then they would jointly save £420 pa. You will also need to compare the cash ISA situation to see which your best options are. But some good news for a change!
If you have a question you would like Trevor to answer, please email it to: yourmoney@rwpfg.co.uk or post it to Your Money, Rutherford Wilkinson Ltd, Northumbria House, 21-23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS.
