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Budget implications for the over 50s and those approaching retirement

Age UK has published a very useful summary of changes announced in the 2017 Budget along with previous announcements which have most impact on people heading towards retirement. The key points are as follows:


State Pensions and benefits

State Pension and benefit rates were announced in November 2016. Some key points are:

The full basic and full new State Pension will be increased by 2.5% to £122.30 and £159.55 respectively.

Other elements of the State Pension and disability benefits such as Attendance Allowance will rise by 1% in line with the rise in the Consumer Price Index (CPI).

The standard rate of Pension Credit guarantee for a single person will be increased to £159.35, or for couples to £243.25, in line with the rise in average earnings.

The majority of working-age benefits, such as Jobseeker’s Allowance, will be unchanged. They are frozen at their 2015–16 levels for four years following the Welfare Reform and Work Act 2016.

State Pension age

The current State Pension age for men is 65. For women it is gradually increasing from 60 to 65 and is currently 63 and nine months. State Pension age will be increasing from 66 to 67 between 2026 and 2028. There will also be five-yearly reviews to look at State Pension age after that.

Use the gov.uk State Pension calculator to find out your State Pension age.

Private pensions and saving

Previous announcements were confirmed as below:

The Money Purchase Annual Allowance for people who have accessed their private pension will be reduced to £4,000 each year. This was previously announced in the 2016 Autumn Statement and means that if people use some of their pension savings, usually through an income drawdown account, they will be limited in future to only saving £4,000 each year.

The interest rate on the new NS&I Investment Bond is confirmed as being 2.2% over a term of three years. The Bond will be available for 12 months from April 2017 and will be open to everyone aged 16 and over, subject to a minimum investment limit of £100 and a maximum investment limit of £3,000.

The ISA limit for tax-free savings will rise to £20,000 from April 2017.

Tax changes

Tax allowances and thresholds

The Chancellor confirmed the previously announced tax allowances and thresholds. The personal allowance is the amount of income you can receive before you pay tax. This will rise from £11,000 to £11,500 in April 2017. Basic rate tax will be payable on taxable income up to £33,500 and the higher rate threshold will be set at £45,000.

National Insurance

There will be changes to National Insurance for self-employed people. The Government previously announced that it would abolish the flat-rate Class 2 contributions.

The main rate of Class 4 National Insurance contributions will increase from 9% to 10% in April 2018 and to 11% in April 2019 in order ‘to reduce the gap in rates paid by the self-employed and employees, and to reflect the introduction of the new State Pension to which the self-employed have the same access.’ National Insurance is not payable by individuals who are above State Pension Age.

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