In August, the Department for Work and Pensions (DWP) announced a number of changes that will be made to the State Pension. It is now only 12 weeks until the news rules kick in, yet many people are still unaware that they might be affected.
At the start of 2021, the Government announced an increase to the age that claimants can receive their State Pension, which is now 66 years, and also increased the weekly State Pension allowance to £179.60 per week. In August, the DWP disclosed that further rule changes to the State Pension would be made due to Brexit, which could leave some elderly people without any State Pension at all.
With only three months to go until the new rules are in place, it is important to know whether you will be affected by the new rules. Here’s everything that you need to know about who will be affected by the most recent changes to State Pension.
Who will be affected?
The latest State Pension changes, which will take effect on January 1, 2022, come as a result of Brexit. With the UK no longer part of the EU, changes to the State Pension have been made that will affect claimants who are living, or have lived abroad.
Those who may have previously met the eligibility criteria for the UK State Pension pre-Brexit may have to re-think their financial plans as of next year.
Pensioners living abroad
The recent changes to State Pension rules will affect anyone who moves out of the UK to live in the EU, EEA or Switzerland.
The rules will also affect anyone who has previously lived in Australia (before March 1, 2001), Canada and New Zealand. Under the new rules, UK citizens who have lived in these countries will not be able to count their time spent abroad as a period of qualification for their State Pension.
As it stands, you need at least 10 qualifying years of National Insurance to receive any kind of State Pension and 35 years to receive the full amount.
The changes to State Pension will affect you if you move to, live in or move between the EU, EEA or Switzerland and have previously lived in Canada, New Zealand or Australia (before March 1, 2021). You could see changes to your pension pot if you meet the following criteria:
- You are a UK national, EU or EEA citizen or Swiss national;
- You move to live in the EU, EEA or Switzerland after January 1, 2022;
- You move to another EU, EEA or Swiss country on or after January 1, 2022.
The new rules will not affect any UK nationals, EU or EEA citizens, or Swiss nationals who are living in the EU, EEA or Switzerland before December 31, 2021.
What if you already have your pension?
The government has said that the new changes will apply whether you have already received your State Pension or not. If your pension is already in payment, it will be recalculated according to the new guidelines.
This could be a problem for those who can no longer count time spent abroad as a period of qualification. If you cannot claim 10 years of national insurance, you may not be able to receive any State Pension at all!
How to check your State Pension
If the new rules have left you unsure of how much State Pension you can receive, the government has a free online tool that provides a State Pension forecast.
How to prepare for the State Pension changes
If your pension is due to be affected by the changes, it may be a good idea to rethink your personal finances by looking into other forms of post-retirement income. If you are no longer eligible for UK State Pension, I recommend looking into the following:
- Setting up a private pension;
- Saving for retirement with an ISA;
- Seeking an employer who offers a workplace pension.
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