Although it isn’t due to be introduced until 2016, the flat rate state pension is a major shake up of the retirement benefits system and will have an impact on anyone retiring after that time. It’s therefore important to understand what it means and to carry out a pension review accordingly.

If you’ll be retiring before April 2016 then the changes won’t affect you and you’ll be paid a state pension under the current system. Currently this is £107.45 a week for the basic pension or £142.70 if you get the additional pension based on National Insurance contributions or you get pension credit.

Retirement After April 2016

If you reach state pension age after April 2016 then you’ll receive the flat rate pension rather than the existing one. This involves some major changes as follows:

1. You’ll need to have made National Insurance contributions for at least ten years to qualify for a pension (currently it’s only one year) and this will only get you £41 a week.

2. To get the full state pension you’ll need to make 35 years’ worth of NI contributions (currently you only need 30 years).

3. With 35 years’ NI contributions you’ll receive £144 a week at today’s values. Since state pensions are adjusted for inflation this is likely to be more when the policy comes into effect. The new pension will be adjusted in line with the CPI index or 2.5% each year, whichever is higher.

4. The second state pension, pension credit and other top-up schemes will cease. However, if you’ve already built up an entitlement to a higher pension through second pension or SERPS contributions before 2016 this will be protected but you won’t be able to add to it.

5. You’ll be able to take time out to raise a family and still build up state pension qualifying years, which isn’t currently the case.

6. Eligibility for a pension will be on an individual basis, so married couples will each get their own pension rather than the married couple’s rate that’s paid at present. The other side of this is that a widow without enough qualifying years for a full pension will no longer get a portion of her husband’s pension after he dies.

7. If you’re still in a final salary pension scheme with an employer you’ll end up paying more in NI contributions as the contracting out option will no longer be available.

8. The state pension age will be reviewed every five years starting in 2016. It’s currently planned to increase it to 66 in 2020 and 67 in 2028.

Additional Pensions

Because the changes mean the end of the second state pension if you need to increase your income in retirement you’ll need to look at other means. These changes overlap with the government’s plan to have all employees enrolled in a workplace pension scheme which will give them an additional means of saving for retirement.

Low earners and the self-employed, who may in the past have found it hard to build up enough contributions for a full state pension, will benefit most from these changes.

If you’re on a higher income want to save more for your pension then you’ll need to look at other alternatives outside of National insurance such as starting a private pension plan or a SIPP. If you’re in a pension scheme with an employer you could also look at making additional voluntary contributions (AVCs) to boost the value of your pension pot.

Kay Brown is a writer who has a keen interest in personal finance. With the imminent changes to pensions, she suggests conducting a pension review so that you know the impact that the flat rate pension will have on your retirement.

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One of the many things we do as we work each day is consider what our retirement will be like. Do you have yours planned?

I know that I want to build myself a little house near the water in a sunny and warm area, maybe somewhere in Africa or along the Spanish coastline. All my years of hard work will pay off and my retirement will be my time; a time to relax, explore things I haven’t explored yet and visit areas that are still on my “to-do” list.

Enjoy an around the World Cruise

One of the ideas I had once my pension pays out is to take some of the money and book myself on an around the world cruise. Travel in style and luxury, enjoy the on-board food and entertainment and discover countries and sights that I haven’t seen before.

The advantage to waiting until retirement before you take an around the world cruise, is that you have nowhere to be in a hurry. Your days of juggling work and home, getting the children off to school and working full-time are over, it’s your time to shine and enjoy your well-earned break. Do a pension review and ensure that you will have enough money to live comfortably after retirement while enjoying some new experiences such as an around the world cruise.

Try Something New

My idea when I retire is to try something new; maybe take an arts class and learn how to spend my days sitting on the beach front, the sun on my back with a paint brush in my hand.

Another great way to spend time is to explore new countries and try all the foods I’ve been too scared to try before. Have a crocodile steak in Africa or try the spicy delights of Morocco.

Once you retire it’s your time to shine, why not try new things. Write up a list of all the things you want to do when you have the time and spend your time crossing items off the list.

Explore New Countries

I’ve always had an urge to visit Tunisia, I hear there are some fantastic historical ruins there, some of which put the Colosseum in Rome to shame. This isn’t a possibility now, I work full time and manage my children and family, and there isn’t much time to do anything else. But once I retire, have done my pension review and know how much money I have to travel, experience new things and try something different, this will be on my list.

The advantage of travelling when retired is you don’t have a deadline, you don’t have to rush home to get back to work and you can enjoy your holiday at your own leisure. What a pleasure. I hate having to rush home from a holiday, only to start work the very next day and when you have travelled overseas, work is gruelling as you struggle with jet lag. In your retirement there are no deadlines; you simply do everything at your own pace which means holidays will become more enjoyable.

Plan Your Finances

Planning your retirement is exciting and I’ve been dreaming of retirement since I was young as working seven days a week for years on end, I deserve to retire to a wonderful beach house where I can travel on a whim without deadlines. But I need a pension review to ensure I have enough money to live on for many years without working and extra money to travel, try new things and go on my cruise around the world.

It’s really important to start planning early on, save up what you can and add to your pension wherever possible to ensure a comfortable lifestyle in your older years.

Kay Brown is a writer who is passionate about finances, being prepared for the future and travel. With a pension review in place, your retirement can be a pleasant experience where you are in complete control.

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When you want to grow your money or just keep it safe, probably your first impulse is to look for a bank account that offers good interest rates and put it in there. This is how most of us will keep our money safe and amass a little interest over time, but are you really making the most of your cash when you put it away like that and forget about it? Could you be doing more with your cash or enjoying more benefits? Here we will look at how to get more from your money and how to choose the right account or service for you and your money.

Understanding Bank Accounts

Before you put your money into any account, you should make sure that you understand precisely what a bank account is and what it does. What you might not be aware of for instance, is that when you put your money into an account that money gets invested into properties, projects and businesses as though you were playing the stock market with it. The interest you accumulate is the customers’ cut of the profit the bank makes by making those investments.

Now generally this interest is pretty low in a current account, but you can make more interest by putting it into a range of savings accounts which generally make accessing your money more difficult. Because you take your money out of a savings account less frequently, the banks can make more profit from investing it and thus they can offer you higher APR (annual percentage rate). If you pay into an ISA that doesn’t allow regular access, then this will provide you with even higher interest.

Choosing the right bank account then should mean choosing the bank that you most trust, choosing the deal with the highest APR (make sure it’s cumulative interest) and choosing the one that offers the easiest access. In general you should also make sure that you have multiple bank accounts with different organizations. This will keep your money safer because it won’t all be in one ‘pot’ should anything happen to that bank, and it will also help you to keep track of your own money and to budget more wisely.

Other Options

The problem is though that with any bank account you will still only be taking a cut of the profit they get from investing your money – and a very small cut at that. There are ways you can increase this amount further though, which include investing yourself in stocks and shares (or bonds) or alternatively using something like a self-managed super fund which means essentially teaming up with some other people to invest your cash jointly and choose which investments you want to make.

There are also other ways you can keep your money safe which provide other benefits or which are more suitable for particular groups. For instance if you run a large business and are worried about potential bankruptcy you might be interested in asset protection in which case you may be interest in a Swiss Annuity which pays you back your own money with interest over a set duration. If you need to take out life insurance to protect your family meanwhile, then life assurance policies can help you to invest your cash while at the same time protecting your family and could be a great way to protect your family.

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How to Cut Down Your Utilities Bill

Now that it seems likely we’ll be facing a double-dip recession most of us will be looking at more ways to tighten the belt whilst the fat-cats carry on stuffing their faces with cake and Champaign – ok – that’s enough politics – there are serious matters at hand here, so let’s take a look at how we can help ourselves instead of just crying about it!

Below are some splendid energy saving tips that should help you save quite a bit of coinage in the coming year – remember you might not have the time or energy to put all of these into action but even one or two of them could have a notable impact on your finances.

No Investment Required

Wash smart – taking a shower uses around 50% less water than a bath, which means you’ll be saving up to 10% on your overall heating bill – and if you have a water meter you’ll also be saving on water rates too.

Wash smart #2 – make sure you only run your washing machine with a full load or ensure you set it to a low energy/eco-friendly setting to make sure you’re not wasting hot water and therefore money.

Cook smarter – when you’re boiling water in a pan make sure you always keep the lid on as the water will boil much faster and  will waste less energy. Also don’t put too much water in the kettle, just use as much as you need for your tea. If we all followed this simple rule for a whole year the UK could save enough electricity to power half the county’s street lights for the next year!

Minimal Outlay

Have a Light Bulb Moment – energy saving bulbs have now dropped in price and they’re now so efficient they use up to 80% less electricity than a traditional bulb and can last up to 10 times longer. In their average lifespan an energy saving bulb should save you around £45.

Get suited and booted – well – not a real suit, just a jacket, and for your boiler not for you. This is relatively easy going in terms of effort and cost; buying a 75mm jacket for your boiler should save you around £40-£50 a year so the boiler-jacket will pay itself off in just 3-4 months.

Radiation Measures – if your radiator is on an external wall you could be losing as much as 20% of your heat through the walls. Instead purchase radiator panels and place them behind these radiators to help reflect heat back indoors. This could save around £60 a year for the average family.

Higher Cost Options

Feed from the Sun – sadly for us locals the UK is not the sunniest spot in the world – but it should still be worth considering solar panels. Costs vary widely from supplier to supplier but the average UK household could generate around 40% of their total electricity bill year on year so it should be fairly easy to calculate if it’s a cost effective solution for your home.

Double Glaze to Feel the Blaze – this is one of the more expensive options but in the long run it’s as simple as this – twice as much glass equals half the heat loss. Double glazing also cuts down noise pollution so your home will be more of a relaxing and tranquil environment. Installation costs vary widely but with savings of around £150 a year compared to a non-double-glazed home this is an investment which will slowly but surely pay for itself with dividends.

Insulate don’t Hesitate – many homes in the UK don’t have adequate or any loft and cavity-wall insulation. If you live in an old building you’re probably losing around 30% of your heat through the roof. Insulating an average family home’s loft costs around £200-£300 but should save you around £150 a year so it would have paid for itself in just 3 years. The same can be said for wall insulation which also has roughly the same cost/benefit ratio.

With this list of potential money saving options you should be ready to face 2013 with a lighter heart when it comes to worrying about your energy bills.

I am a copywriter and poet with a bachelor’s degree in English Language and Creative Writing. I have worked in various marketing & creative roles since 2001. My aim is to publish at least one novel before I die – so far I have had 2 poems published internationally in print as well as some online. In my professional capacity I currently work for an advertising agency in London.

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Not all annuities are the same

One of the safe retirement investment options currently on the market are annuities. It might surprise you as these have a reputation as unsafe financial products. Anyway, the truth is that there is very much confusion about annuities.

Such investment vehicles are not all the same. Except variable annuities, there are other similar options which are much safer, like fixed annuities. However, as some condemn all annuities, others tend to present the variable type as the one which can generate the higher gains.

Misleading information and an improper knowledge about these products is what leads people to choose variable annuities for their retirement plans. One the one hand, it is true that this option allows you to get high returns, but this opportunity is to set against some factors that can compromise your retirement income.

What are variable annuities?

Variable annuities are a security and consist in a mutual fund subaccount which includes fees that can reach 7%. These include extra fees that not every investment option has and can be therefore avoided. Variable annuities, in fact, are insured by an insurance company that normally charges management expenses along with other fees.

As the name suggests, the gains generated by this type of financial product can considerably vary as they are highly influenced by the market performance. It means that if you invest an amount of money today, an economical downturn can produce a negative return causing you to lose part or all of your money. That considered, variable annuities are definitely not the best way to ensure a fruitful retirement.

What makes variable annuities risky?

The worst thing about annuities are the many fees you’ll need to pay and that not every financial advisor will tell you about. When planning your retirement you most probably consider important to ensure a safe, steady income. One of the most important things to avoid is unnecessary fees.

In the case of variable annuities, up to 2% of the fees consist in management fees, which are due to the peculiar way this investment option is managed. To these, you have to add up expense fees that, like management costs, you will need to pay to the insurance company that manage your account even in case it crashes.

From this point of view, variable annuities differ considerably from other accounts that only include fees related to your contributions payment or money withdrawals. As experts say, the many fees included in a variable annuity can seriously compromise your gains as you might end up losing money even if your investments do well.

Federica writes for First Senior Financial Group, providing investment education to people at or near retirement with a team of Philadelphia retirement financial advisors. 

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