Pensions have always been a topic of concern for immigrants. Now, the UK has introduced a new pension policy. Friends interested in UK immigration, let’s learn more together!
1) Basic State Pension
The calculation of the effective working age for receiving the Basic State Pension is determined by the salary after deducting National Insurance Contributions.
The latest national pension policy was implemented after April 6, 2016. If a male was born after April 6, 1951, or a female was born after April 6, 1953, and the applicant meets the age requirement of 65 years, they can apply for the UK pension. Starting from 2016, the minimum Basic State Pension will not be less than £148.4 per week. Your National Insurance record will determine the amount of pension you can receive in the future.
2) Additional State Pension
The Additional State Pension is based on National Insurance Contributions, allowing for amounts beyond the Basic Pension. There is no specific figure for how much can be received. However, the following conditions must be met to qualify for the Additional Pension:
· Annual income exceeds £5,772 (2014-2015);
· Caring for children under 12 and applying for child benefits;
· Caring for disabled individuals for more than 20 hours a week and having applied for 'Carer’s Credit';
· Receiving relevant sickness or disability benefits.
Note: If annual income is less than £5,772 (as in 2014-2015) or if self-employed or unemployed, one cannot receive this pension.
3) Occupational Pension Schemes
Employers implement occupational pension schemes for their employees. In general, the accrual of this pension is determined by the company's profits or employee contributions. For companies with occupational pension plans, a Voluntary Contribution Scheme (AVC) is also required, allowing employees to invest more funds for their future pensions. Additionally, there are many types of personal pension plans,
but it is best to consult an expert for specialized advice.
Furthermore, it is important to contact the government pension department four months before becoming eligible for retirement benefits.
Since April 2015, pension savers can use their pensions like a bank account. Savers can either withdraw all their pensions in a lump sum or receive smaller amounts over a certain period. Savers can withdraw 25% of their pension tax-free, which can be taken as a lump sum or in installments; any amount exceeding 25% will be subject to tax.
If a pension saver withdraws the entire 25% tax-free amount in one go, they will be taxed on the remaining 75% of their pension, with the tax rate based on the saver’s personal income tax rate. For example, if you have a pension of £200,000, you can withdraw £50,000 tax-free; if you want to withdraw the remaining £150,000, you will have to pay tax at your personal income tax rate, which means it will be calculated at a higher tax rate.
There is also a more effective method; if the saver’s other income is taxed at a lower rate or is tax-free, this method is particularly effective. The saver can withdraw smaller amounts of pension, stretching the income over a financial year to maintain a lower marginal tax rate.
For instance, if the pension savings amount to £200,000, and the saver withdraws £20,000 per year, the tax payable will be lower. Assuming the saver wants to withdraw £20,000 that year, the tax-free amount would be £5,000, and the remaining £15,000 will be considered income. If this year the saver has no other income apart from this £15,000, the highest tax rate payable on the pension withdrawal would be 20%.
In this way, the saver can utilize the personal tax allowance for the year, such as the personal tax allowance of £10,600 for the 2015-2016 financial year. However, it is important to note that if the saver has other taxable income, it should not be ignored. Side jobs, state pensions, work pensions, savings interest, and investments outside of ISA personal savings accounts all count as income.
