(i) Flat rate pension
The flat-rate pension came into effect in April 2016 and was implemented to simplify the present, ‘relatively-complex system’.  It was also intended to be unbiased to those who have typically lost out, particularly women who are more likely to receive a lower State Pension than men. The amount of the new full State Pension is £155.95 but the payout for each individual depends on national insurance contributions. The new rules require a minimum of 10 years to qualify for the State Pension. To be able to eligible for a full basic State Pension, those reaching age need 30 years of qualifying contributions or credits.
Under the new pension reform, retirees have flexibility of choosing how they will use their pension pot. However, it is important that those reaching retirement age explore how they might turn their retirement fund into an income stream. The following are the retirement income products available to retirees and can mix and match any of the options below:
In addition to the changes stated above, savers are also no longer required to buy an annuity. ‘An annuity is a regular form of income paid for the rest of the pensioner’s life in exchange for a lump sum.’ T...
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...ny financial dependents. It is vital that retirees choose their retirement income wisely as there are countless risks related to saving and accessing pension income. The following are risks that should be considered. Firstly, investment risk: there is a risk that investments may not obtain the expected level of return, which in turn disrupts the security of stable income. Another, is the risk of inflation. There is a possibility that income does not increase in line with price inflation, and hence will lose value in relation to the price of goods and services. The most significant and probable risk is longevity. This is the risk that retirees live longer than anticipated which could result in spending all of their pension pot and requiring additional money to fund retirement. Insolvency is the risk of the provider of their pension or their employer becoming bankrupt.
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