New state pension comes into effect

The government’s new state pension is set to come into effect on Wednesday 6 April as part of a major package of reforms to tax, pensions and savings.

Chancellor George Osborne and Work and Pensions Secretary Stephen Crabb have claimed the new pension will help millions of new pensioners achieve ‘dignity in retirement’. The state will provide over £8,000 annually (£155.65 per week) when they reach their state pension age.

Official data predicts that over 75 per cent of women and 70 per cent of men will gain in the first 15 years of the new State Pension, with over three million women set to gain an average of £550 per year by 2030.

Over 18 million people will benefit from a tax cut as a new personal savings allowance comes into force which takes 92 per cent of savers out of savings tax altogether.

Originally, regulations meant that for every £100 of interest earned, basic rate taxpayers would lose £20 in tax, and higher rate taxpayers £40. Most UK adults will also be able to earn up to £1,000 interest a year on their savings without paying any tax. Taxpayers will receive a maximum tax saving of £200, and higher rate taxpayers will achieve £500 interest tax free, meaning the same maximum tax saving of £200.

Commenting on the changes, Osborne said: “Today’s reform of the state pension is the most significant since its inception. The new system means that at last, people will have certainty in what they can expect from the state in old age – and for many women and the self-employed, it will be more generous.

“People will know that the full amount when they reach state pension age will be over £8,000 a year in today’s money, so they can plan other retirement saving they may want on top. These changes will benefit women in particular, with three million significantly better off by 2030.”

At the same time, with our new National Living Wage lifting pay, we’re taking steps to make sure people keep more of what they earn. Today’s income tax changes mean that basic rate taxpayers are paying more than £900 less than they were in 2010. There’s also action today to boost saving – with our new personal savings allowance lifting 17 million people out of paying any tax at all on money they’re putting away for their futures.