Company contributions to pensions are a special case for tax purposes. The company receives a deduction for the amounts paid but they are not taxed as a benefit on you, nor are any profits in the scheme over the years taxed. Pensions received either from the State or former employers however, need to be reported on your tax return as income received.
In addition to your company pension you have the option to make personal pension contributions.
From April 2010 the phased equalisation of male and female state pension ages commenced, so that eventually by 2020, both sexes will retire at age 65. At the moment, the current state pension age for men is 65 and for women it is 60.
Further on from this the harmonised age will increase from 65 to 66 over 2024-2026, to 67 from 2034-2036 and to 68 by 2044-2046.
At first, it appears that the changes affect women only. Where men are in receipt of certain state benefits at age 60 (in order to avoid charges of sex discrimination) however, this age will also rise over time; an example of this is the Winter Fuel Payment. This is currently geared to the age of 60 for both sexes, but it will rise gradually to 65 for everyone. These pension changes affect everyone going forward. Some concessionary benefits will remain at 60 for all, including exemption from prescription and eye test charges and travel.
Associated changes to be aware of
From April 2010, the number of qualifying years needed for a full state pension will be a flat thirty years for everyone. This is strictly for state pensions only, as the current 90% of working life condition will continue to apply to the relevant weekly bereavement benefits.
Pension based on spouse’s contribution
A pension based on the husband/wife’s contributions, limited to approximately 60% of the standard rate, will no longer be dependent on the husband /wife having reached retirement age and them having not deferred their state pension.
All that will be necessary in the future after April 2010 is that the claimant reached the relevant state pension age.
Adult Dependency Increase
The adult dependency increase is an increase for a wife, husband or someone who is looking after your children, if he or she is considered to be financially dependent on you.
Previously, where a husband is of state pension age and his wife is under the pensionable age, the husband could claim the adult dependency increase provided his wife does not earn more than £64.30 per week, which is the current rate.
The dependency increase was all paid to and taxable on the husband and when the wife reached pensionable age, the dependency increase was replaced with the wife’s pension in her own right, which was payable to her and taxable on her.
If you were already entitled to this increase on 5 April 2010, you will be able to keep it until you no longer meet the conditions for the increase or until April 2020, whichever is first.
The dependency increase is now being phased out and is not available for new claims on or after 6th April 2010.
Auto credits, whereby a man aged 60-64 receives a pension credit without having to meet any conditions, other than being UK resident, are being abolished as fewer years’ contributions are now needed for a full state pension.
Other Associated Pension Changes
- The current rule whereby a reduced state pension of less than 25% of the standard rate is simply not paid at all will be removed.
- The initial contribution condition for state pension will be abolished so those receiving only credits during their lives will in future qualify.
- Each earlier year’s Home Responsibilities Protection entitlement will be converted to 52 weeks of Class 3 contributions.
- Home Responsibilities Protection will be replaced with a new weekly credit for those caring for children.
- A new contributory credit will be introduced for those caring for severely disabled people for 20 hours or more per week.
- The current three bands of varying accrual for state pension (S2P) will reduce to two.
From 6 May 2010 married men and civil partners will be able to claim a pension based on their spouses or partner’s contributions but only if the spouse or partner was born on or after 6 April 1950. This means that a male civil partner cannot receive such a pension until at least 6 April 2015.