Stoke-on-Trent independent financial adviser, Becky Hammonds of Willow Financial Solutions, looks at what pitfalls may be waiting for pensioners in 2022.
Speculation about a raid on pension tax breaks for higher earners is still simmering away in the background.
Chancellor Rishi Sunak held two Budgets last year, and industry experts feel a repeat of that in 2022 would provide two opportunities to announce a big overhaul of pension tax relief.
However, the move would be unpopular – causing an outcry amongst better-off savers, and practical complications due to the way different pension schemes work.
Pensions tax relief allows everyone to save for retirement out of untaxed income, which means you get a greater advantage the more you earn.
The rebate is based on people’s income tax rates of 20 per cent, 40 per cent or 45 per cent, which tilts the system in favour of the better-off because they pay more tax.
Any reform is likely to result in the creation of a ‘flat rate’.
At its worst, that would mean the top-up was set at 20 per cent for everyone, raising an estimated £10billion for the Government.
State Pension Triple lock scrapped
Many elderly people are infuriated by the Government’s decision to suspend the ‘triple lock’ guarantee on state pension increases.
A far smaller than hoped for 3.1 per cent rise will happen in April.
Under the triple lock, the state pension is meant to increase every year by the highest of price inflation, average earnings growth or 2.5 per cent.
But the Government scrapped the earnings element from the 2022 rise, because wage growth was temporarily skewed to more than 8 per cent due to the pandemic.
So how much will the state pension rise by in 2022?
The basic state pension will increase by £4.25 to £141.85 per week, or around £7,370 a year, this April.
The full flat rate will rise by £5.55 to £185.15 per week, or around £9,630 a year.
As you can see, this is a meagre income and the only reliable way to secure the retirement you desire is to save for your own pension.
Pensions are a complex area and an independent financial adviser is ideally placed to provide information and advice on the best route to take.
For more information contact Becky Hammonds on 07969 269677 or email becky@willowfs.co.uk visit: www.willowfs.co.uk
