UK State Pensions to Rise as Inflation Increases to 3%

Britain’s retirees will receive a boost in their state income next spring as the UK’s Office for National Statistics (ONS) reported that the annual inflation rate was 3% at the end of September, its highest level in more than five years.

As a result of the increase in inflation, British pensioners will receive a 3% rise in the spring of 2018, when UK’s state pension will be uprated according to the so-called “triple lock” protection guarantee. The triple lock, introduced in 2011, guarantees that the basic state pension will rise by at least 2.5%, the rate of inflation, or average earnings growth, whichever is largest.

According to the BBC, the majority of public sector employees will see significant increases in their accrued pension benefits next year because September’s CPI data is used as the basis for the payments. Teachers will see a 4.6% increase, National Health Service employees will get a 4.5% increase, and police officers will receive a 4.25% raise. Recipients of the new state pension will have their weekly income increased to £164.38 from £159.60.

The maximum amount workers are allowed to save into a defined contribution pension plan, known as the Lifetime Allowance, will also rise by 3%. Those with pensions exceeding £1 million ($1.32 million) will pay a 55% tax charge on any withdrawals. However, in April 2018, they will be allowed to save an extra £30,000 without paying tax.

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Because of the triple lock, pensions have risen by at least 2.5% every year since 2010. However, the UK government has considered eliminating the triple lock feature, and a recent report from the Organization for Economic Cooperation and Development (OECD) recommended removing it.

“Indexing the state pension solely to average earnings would be fairer,” said the OECD, “while it would still allow pensioners to benefit from improvements in living standards.”

The rise in inflation also means that UK businesses will pay an additional £270 million in business rates next spring, according to the British Retail Consortium (BRC). The business rates are based on the retail prices index (RPI), which is linked to, and typically higher than, the CPI. According to the ONS, the RPI was 3.9% at the end of September.

“Without intervention to freeze business rates from government, retailers and other firms will face a [rate increase] twice as large as last year,” said the BRC in a statement. BRC CEO Helen Dickinson added, “The consequences of today’s RPI figures could be severe for many shops in a precarious position and struggling to survive. Consumers, already seeing household incomes eroded, will face further misery as the pound in their pocket buys them less at the checkout.”

Tags: Lifetime Allowance, Office for National Statistics, Pension, UK

To fix Kentucky’s troubled pension system, Gov. Matt Bevin, Senate President Robert Stivers, and House Speaker Jeff Hoover announced the “Keeping the Promise” plan Wednesday.

For teachers, the plan will keep their current pension plan unless they either have or reach 27 years of service; those that do will be moved into 401(k) plans. New teachers will be placed immediately into the 401(k) plans.

In order to slow a large number of retirements, current teachers will be able to remain in their current plans for an extra three years. However, educators will no longer be able to use accumulated sick days to boost their benefits after July 1, 2023. The plan will also bring legislators, who have more generous benefits, into the retirement system of other state employees.

Under the plan, current and future “hazardous duty” workers, such as fireman and police officers, will retain benefits in the current pension system until they either turn 65 or reach 27 years of service, when they will be moved into a 401(k)-style plan. New hazardous duty employees will have the option to switch to a defined contribution plan, but unless they elect to the change, they will still be enrolled in the current cash balance plan.

For those still working, Bevin said the full retirement age will not increase.

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“When you have a plan that fulfills every promise, that delivers on everything that is contractually required, that addresses every single person and takes into consideration both what is legally and morally appropriate, and that even when it’s done, everybody is slightly unhappy with, you know you have the right plan, and we have the right plan,” Bevin said in a statement reported by WKYT.

In addition, the plan will begin to pay for retirements in a new way that “mandates hundreds of millions more into every retirement plan, making them healthier and solvent sooner.”

Bevin said that $1.2 billion will be required to fund Kentucky’s $60 billion deficit in the next budget session, which he said will be difficult.

Bevin also said that a special session, now pushed back to early November, will begin as soon as possible, with Hoover adding that public hearings on the pension proposal could also happen prior to any special sessions.

If passed, the law will go into effect July 1, 2018.

Tags: Governor Matt Bevin, Keeping the Promise Plan, Kentucky, Pension, Pension Reform

Kentucky Governor Reveals “Keeping the Promise” Plan to Aid Pension System