11:28 24 March 2013
On March 20th, 2013, Chancellor George Osborneconfirmed that the government will introduce a flat-rate state pension. This announcement came one year earlier than planned. It was also confirmed that employees who are now paying more National Insurance (NI) contributions will receive higher benefits when they hit retirement.
In 2006, when the £144-a-week pension will take effect, contracting out of the state second pension will be removed together with the NI rebate given to private sector employees.
The chancellor added that those extra NI contributions would be used to secure formerly contracted-out workers extra pension. This is something that consumers are expected to welcome with open arms. According to a Which? survey of 2,000 consumers, 65per cent were worried about the value of their pension and many are not prepared for retirement.
Following the announcement, pension savers hope that there wouldn’t be any more nasty surprises. This group of people has been hit hard by previous proposals and previous announcement. In the past two years, the annual allowance has decreased from £255,000 to £40,000. In addition, lifetime pension allowance was also cut from £1.5million to £1.25million.
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