State pension: Triple-lock ‘no longer affordable’ says Ken Clarke
State Pension payments are of particular importance when a person decides to depart from the workforce for a new life in retirement. The sum often make a substantial proportion of a person’s income in later life, and understanding how much one is set to receive is vital for budgeting and goal setting. Under current rules, the state pension increases every year, providing reassurance for those who have retired.
This is done under a system known as the Triple Lock Mechanism, which was first introduced in 2010.
For the basic state pension and new state pension sum, payments increase annually by the greater of price growth, earnings, or 2.5 percent.
While Britons will observe an increase this year, it is worth noting that some pensioners will find they miss out on the uprating.
One such group are individuals who have left the UK to retire abroad in specific countries.
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Due to Brexit, the government has also provided further guidance on the matter.
It has stated: “You can carry on receiving your UK state pension if you move to live in the EU, EEA or Switzerland and you can still claim your UK state pension from these countries.
“Your UK state pension will be increased each year in the EU in line with the rate paid in the UK.”
State Pension payments will also increase if a person is living in a country with a social security agreement with the UK.
However, Canada and New Zealand are excluded from this list, it is important to be aware.
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People living in the EU, EEA or Switzerland can also count “relevant social security contributions” which are made in EU countries to help meet the qualifying conditions for a UK state pension.
Usually, the state pension sum is based on the amount of National Insurance contributions a person makes throughout their working lifetime.
Britons usually need at least 10 qualifying years on their record to receive any state pension at all, although these do not have to be qualifying years in a row.
People who are living in countries which aren’t covered by agreements will therefore forfeit a pension increase until they return to the UK.
It is vital these individuals are aware of this fact to avoid a nasty surprise later down the line.
To find out more about the matter, Britons are encouraged to contact the International Pension Centre, which can also provide advice.
For those who are entitled to a state pension increase, there are details to bear in mind.
The sum is set to rise in April 2021, and Britons will witness an increase of 2.5 percent.
As a result of this increase, pensioners who are on the full new state pension will receive an extra £4.40 per week.
This will take the new state pension sum for the 2021/22 tax year to £179.60 weekly.
The full basic state pension, the older scheme which many pensioners claim under, will also undergo an increase of £3.40 per week.
This means the sum will increase from its current rate of £134.25 per week, to £137.65 weekly.
However, the government website states: “You may get less than the new full state pension if you were contracted out before April 6, 2016.”
For this reason, many may wish to use the state pension forecast tool available on the government’s website, to determine when they are set to receive their sum, and how much.
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