State pension changes 2019: How YOUR state pension will change this year – will it GO UP?

The start of the new tax year is Saturday, April 6, and many changes across tax, pensions and more will come into force. There are several changes for state pensions for this coming fiscal year – which is the tax year 2019/20. Here is a breakdown of those changes.

From April 6, auto-enrolment contributions will increase to 8percent – meaning you will pay more into your workplace pension scheme. 

Auto-enrolment is a government initiative which was put in place in 2012 to help people save for their retirements. 

Almost 10 million people are saving for their pensions through auto-enrolment.

Employers are legally required to automatically enter eligible employees into a workplace pension scheme. 

When you are signed up, a portion of your salary is paid into a pension – alongside contributions from your employer and a percentage from the government known as a pension tax relief. 

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From April 6, auto-enrolment rates are increasing from five percent to eight percent.

This means that the contribution from your salary will increase from three percent to five percent and your employer’s contribution will rise to three percent. 

Estimates from Hargreaves Lansdown predict the average UK earner is expected to see an extra £30 leave their pay packet each month.

Workers earning the UK average wage of £28,759 will contribute £75.41 a month from 6 April – up £29.96 from the current contribution rate of £45.45.

Another change from April 6 is that the pension lifetime allowance will rise from £1,030,000 to £1,055,000.

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This is the amount that you can put into your pension pot tax-free – and it increases according to the Consumer Price Index (CPI) measure of inflation from the year before. 

The third change is that state pension rates will go up in the tax year 2019/20. 

If you reached state pension age before April 6, 2016, you will receive the basic state pension, plus any additional state pension you may have accrued.

However, if you qualified for state pension on or after April 6, you will receive the new single-tier state pension.

According to Which? this is how payments will increase – 

• New state pension: If you’re entitled to the full new single-tier state pension, your weekly payments will increase from £164.35 to £168.60
• Basic state pension: Those receiving the basic state pension will get a weekly boost of £3.25 a week – taking the total state pension from £125.95 to £129.20.
• Additional state pension: The maximum additional state pension cap will increase from £172.28 per week to £176.41 per week.

Finally, pension credit rates will increase in the tax year 2019/20. 

Pension credit is a means-tested benefit for workers who have retired, based on their earnings. 

Both parts of pension credit payments will rise in line with the CPI inflation rate published in the previous September – which is 2.4percent this year.

Guarantee credit

Guarantee credit adds to your weekly income so it reaches a minimum amount set by the government.

This will rise from £163 a week to £167.26 a week for a single person and £248.80 to £255.25 for a couple.

Savings credit

Savings credit is an additional payment from the government to reward you for saving towards your retirement.

The maximum amount you can get as a single person will increase from £13.40 to £13.72 a week. The minimum amount for couples will increase to £15.35 a week, up from £14.99.

Pension credit benefits have also been cut for some couples.

Currently, couples of mixed ages are able to claim pension age benefits, such as pension credit, as soon as the eldest partner reaches state pension age.

However, from May 15, couples will only be able to claim pension age benefits once the youngest partner reaches state pension age.

Pension experts warn that the change could mean some couples are more than £7,000 worse off a year.