Pension Legislation

Pension Legislation Made Simple: A Guide for the Rest of Us

Do you ever feel like the Pension legislation changes every day, and it’s hard to keep up? Well, that is because Pension legislation does change every day. You may not have realized just how often Pension legislation can change. To help you make sense of all this, we’ll go over some of the most recent changes in Pension law – both federal and state-specific – so that you don’t have to worry about things going on behind your back!
Pension Legislation

Recent Pension Reforms

Pension Freedom

Pension freedom was a significant Pension reform that went into effect on April 28, 2015. The goal of pension freedom is to help people save for their retirement- and not rely solely on employer contributions or the government’s defined contribution plan (a 401K). It does this by giving employees full access to any money they’ve saved in their pensions so long as they’re 55 years old or older.

Have you ever wondered?

Is it worth the risk? When you withdraw your Pension funds early – before age 59 ½ – there are penalties associated with doing so:

  • An Internal Revenue Service tax penalty
  • A federal income tax penalty
  • A state income tax penalty

You see:

Some and because many workers don’t have time left until retirement at this point in life, it’s worth questioning whether or not it makes more sense to continue working and contributing that money into a 401K.

The New State Pension

The New State Pension

The New State Pension is likely to be a much more valuable and helpful pension scheme than the old one—but changes are still being introduced. If you’re in your 40s or have just turned 50 years of age, this could well be an ideal opportunity for you to take out money from the state pension system while they make these adjustments.

At some point soon, though (depending on what date your birth falls), there may come the moment when the state pension is a more attractive option.

It gets better:

The new State Pension is likely to be a much more valuable and helpful pension scheme than the old one—but changes are still being introduced. If you’re in your 40s or have just turned 50 years of age, this could well be an ideal opportunity for you to take out money from the state pension system while they make these adjustments.

At some point soon, though (depending on what date your birth falls), there may come the moment when the state pension is a more attractive option.

Passing On Your Pension

Pension schemes have many different levels of security depending on the size of contribution made over time, and it’s worth bearing this in mind when considering what type you choose.

A beneficial way to find out more about pension legislation is by visiting a financial advisor who will be able to give you impartial advice explicitly related to your circumstances. They’ll also talk about how much tax needs paying and what benefits are available, such as basic state pensions or other plans from employers.

Pensions Auto-Enrolment

Pensions Auto-Enrolment

The Pension Schemes Act of 2011 brought in a new law called ‘auto-enrolment. This means that any employer with more than 250 employees must offer all their qualified staff the opportunity to start making contributions into a pension. This also means that if you’re working for an organization and are aged between 22 and state pension age*, it’s your right to be automatically enrolled on one or more pensions by your employer – unless you choose not to!

What does this mean for you?

Besides being able to contribute yourself (which can help make sure you don’t need public assistance when retirement comes around), employers have obligations. They’ll need to pay at least two per cent of employee earnings into a pension and make sure the scheme is ‘default’ – which means it’s set up to provide an income in retirement.

After this, every year, your employer should give you a statement telling you how much has been paid for your wages so far that year, along with information on what they’ll pay next time around. If there’s no statement, ask your employer what they’ll do.

Future Pension Reforms

We’ll look at the changes which have already happened – and what might happen in the future.

There has been a lot of change to Pension legislation in recent years – some good, but most not so good! In particular, people live longer than they used to; this means that retiring now won’t mean having enough money.

In 2014, the government introduced a change to Pension legislation which means that people will have to work for longer – and it’s predicted this could happen again in 2020. This is bad news because not everyone wants to be working until they’re 68!

You see:

But there have been some good changes too – for example; the Pension age is set to increase more slowly than it was. There will also be a change in how much people are expected to pay when they start saving money for their pension. Currently, everyone’s payments go up by a certain amount each year; this will now change based on how much money they earn.

In 2020, Pension legislation will have changed even more! The new rules are likely to apply if you’re under the age of 55 as things stand – but it’s not yet clear for people over that age. It seems like there may be some time before these changes there.

Got Questions? Check These First

What laws protect pensions?

What's the primary purpose of the Pension Protection Act?

What does the new pensions legislation mean for employers?

Does federal law protect pensions?

In conclusion

To sum it up:

The bottom line is that there are a lot of different options for retirement funding out there today. And if you’re confused as to where to put your money, you’re not alone! Pension freedom means that you now have more choices than ever – and it’s up to you to figure out which is the best fit for your needs.

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