The Government has announced that the state pension system needs an overhaul, and in a bold move, decided to do away with means-testing. Read on to find out how this will affect the pockets in your future corduroys.

Last month, the Government announced that it is to create a universal state pension of £140 a week to ensure everybody has a ‘decent’ income in retirement. The increase will be funded by a reported £6bn which will be saved by scrapping the highly complicated and expensive means-tested system.

The proposals for reform, which are due to be published in a Green Paper later this year and introduced in 2015, are thought to combine all current elements of the state pension, including the basic state pension and the state second pension, into one payment.

As well as being easy to understand, the new system should mean that some groups are better off – particularly women. However by removing the contributory link to National Insurance contributions, those higher earners with a full NI history could be worse off.

Currently, the basic state pension for a single person is £97.65, while couples receive £156.15 per week. Top up payments from means-testing the poorest pensioners can increase this income to at least £132.50 for single people and £202.40 for couples.  Under the new system, single people will receive £7,280 per year and couples £14,560 – compared to the current basic state pension, this is an increase of approximately £2,200 and £6,440 respectively.

While the underlying theme from the Government is simplicity and improvement, we must stress that the universal pension will still only provide the minimum income requirement. A comfortable standard of living in retirement requires additional funding.

At CBHC we can provide you with all the information and guidance you need on personal pension planning and investments. Our wealth management specialists will help you to create a portfolio which is reviewed regularly, so no matter how often the Government changes tack on the state pension, your future is secured.

If you would like to discuss your retirement options with us, please contact a member of our wealth management team.