Factors for Pension Planning and Retirement Impact

This report discusses the factors for pension planning, including political, economic, and social factors. It also explores the impact of retirement planning on clients before, at, and after retirement. Additionally, it examines the effect of tax and legislation on retirement planning and highlights the needs of retirement planning for clients. The report concludes by discussing the potential need for further fiscal, State Pension legislation, or other changes in the UK pension system.

Pension
1

Table of Contents
INTRODUCTION...........................................................................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7
2

INTRODUCTION
In UK there exists a pension system through which government employees are provided
pension on basis of it. The system consists of basic state pension and an additional pension
known as second state pension. The NIC is responsible for overall distribution of pension by
calculating percentage.
The report will describe about factors for pension planning. Also, it will be discussed effect
of retirement planning on clients before, at and after retirement (Carrino, Glaser and Avendano,
2018). Moreover, impact of tax and legislation on retirement planning will be explained. Along
with it, needs of retirement planning for client is mentioned.
At present the men can claim pension at age of 65 whereas women age is rising from 60 to
62. This is done to equal both men and women age till 2018. Furthermore, there is no separate
pension given to disabled people in UK. In each state pension, individual is having an access
card that provide minimum guarantee of weekly income and saving card for those who are able
age of 65. Alongside, pensioners receive other benefit as well like healthcare, etc.
Political, economic and social factors for pension planning
In recent times, there are many factors due to which in state pension scheme changes are
made. It has resulted in making changing legislation since pat several years. Also, government is
enforced to modify entire pension system. So, the factors are defined below :-
Political – it is a factor that is related to change in government, political situation, law and
legislation, etc. of country. In UK there has occurred many government changes due to which
laws are modified (Cribb and Emmerson, 2016 ). Along with it, there are several reforms
formed in UK. The new state pension is introduced that regulate and manage overall pension.
Changes in political situation or change in legislation plays a vital role in pension planning.
Economic – this is also a factor due to which there is change in pension planning. In UK the
many people get pension and other benefits. In 2011 the government decided to increase state
pension by CPI of 2.5%. It was known as Triple lock. This guaranteed a minimum income to
pension credit card holders. Furthermore, the triple lock was implemented by analysing report of
Turner 2004.
Social – In this the factors are included related to age, gender, needs, etc. of people. thus, in UK
the social factor that has impacted is age. Now, the pension is given to men who are retiring at
age of 65 whereas women at age 62. But changes are been done in demographic factor. In future
3

both men and women retirement age will be same. Here, age will be increased gradually every
year to equalise men and women. Till 2020 it will be 66 and 67 till 2028. This change was done
on basis of Turner report of 2004.
So, these are the factors that is consider in pension planning. It allows in analysing them
and then accordingly developing reforms and deciding tax rate.
Effect of retirement planning before, at and after retirement
Currently, In UK there is proper retirement planning which provide different options for
people to retire. First is state pension where government give pension to those who are registered
in NIC. Here, amount varies on basis of NIC (Disney, 2016). Another is person pension where
pension provider provide money from retirement fund. The workplace pension is provided by
employer. Here, staff get fixed income that is paid earlier in pension scheme.
There is great effect of retirement planning. When a person retires early, he has to select
specific pension scheme. Also, there are some reformed to be followed as well by client.
Moreover, less pension is received from state pension. It is because there are years counted in it
those how have contributed in NIC. Thus, amount of pension given is based on NIC. But at
certain times workplace does not allot to get retire. During retirement the effect on client is they
get pension according to retirement age. It can be 65, 66, 68, etc.
After retirement the effect is client has to pay more tax on amount withdraw. They
become eligible for it.
This retirement planning will affect the client in many different ways: Before retirement:
Because of new retirement planning there will be changes in retirement age, pension provision,
formalities of getting retirement. At retirement: people who are about to get retired will also have
to face these changes. They will have to review all kinds of updated policies again.
Impact of tax and legislation on retirement planning
It has been analysed that there is great impact of tax and legislation on retirement
planning. This is because government is planning to bring various changes within retirement age,
pension etc. So, any change in legislation or tax can directly impact retirement planning (Loibl,
Summers and Bruine de Bruin, 2019). In UK tax is imposed on state pension, private pension
and earnings from employment. So, if any person takes huge amount of private tax than more
income tax is to be paid. The government has set total value of £1,055,000. However, there is
some amount that is tax free in pension is when 25% is taken of total pension. Besides that, tax
4

rate also depends on when pension is taken out. So, tax rate depends on retirement age. However,
there are certain legislation as well followed.
The tax is imposed on basis of pension and other benefits given. So, if tax rate rises
retired people will have to pay more on benefits given to them. Likewise, if legislation is
changed then retirement planning is modified. The changes are done in aspect of age, income,
pension, etc.
Retirement planning needs
Retirement planning will help in fulfilling wide range of clients in many different ways.
In UK the retirement age of men and women vary. However, there are some options available as
well to them to get retire. So, it becomes important to identify there needs and develop plan
accordingly (Tapadar, Andrews and Pittea, 2019). So, the needs are specified as :
It is necessary to identify at what age people gets retired and what tax rate can be imposed.
Besides that, how in future pension scheme will require changes and how it will affect on UK
economy. The need of retired people and their income level is to be calculated.
In addition to it, UK government must develop a retirement plan for migrants who enter
in UK as labour. This will provide a framework tat what tax rate or reforms are to be followed by
them. the needs related to other UK person by doing age segmentation can also be specified or
mentioned in retirement planning.
Why further fiscal, State Pension legislation or other changes might be needed between
now and 2050
It is analysed that there are some various changes that is required in pension system of
UK. Also, UK population is rising every year. Moreover, with rise in migrants from other
countries it is estimated that there will be total 9.2 million migrants till 2060. Thus, it will result
in ageing population (Vlachantoni, Feng and Falkingham, 2017). However, UK is facing
problem of ageing where there is rise from 27% to 43%. Hence, it requires some changes in state
pension. The retirement age should be increased and also other benefits must be reduced.
In addition to it, UK labour market is increasing to a great extent. There is rise up to 2.5
% as compared to EU 0.6%. also, till 2060 there will be 80% of women working in UK as
compared to EU 75.9%. therefore, more pension will be given to those after retirement. So, it
requires changes in pension policy as it will put more economic burden on UK. the change needs
to done so that situation can be controlled in future.
5

CONCLUSION
It is summarised that legislation, rise in public spending and increase in retirement age
are the factors in pension planning. Moreover, there is high effect of retirement planning on
client. Also, there is high impact on tax and legislation on retirement planning. For example- rise
in age increases tax rate. Alongside, retirement needs of people varies on basis of their age. In
addition to it, UK government must develop a retirement plan for migrants who enter in UK as
labour. also, till 2060 there will be 80% of women working in UK as compared to EU 75.9%.
therefore, more pension will be given to those after retirement.
6

REFERENCES
Books and journals
Carrino, L., Glaser, K. and Avendano, M., 2018. Later pension, poorer health? Evidence from
the new State Pension age in the UK. Harvard Center for Population and Development
Studies Working Paper Series.
Cribb, J. and Emmerson, C., 2016. What happens when employers are obliged to nudge?
Automatic enrolment and pension saving in the UK (No. W16/19). IFS Working Papers.
Disney, R., 2016. Pension reform in the United Kingdom: an economic perspective. National
Institute Economic Review, 237(1), pp.R6-R14.
Loibl, C., Summers, B. and Bruine de Bruin, W., 2019. Pension Freedom Day in the United
Kingdom: Early evaluation of consumer response. International journal of consumer
studies, 43(1), pp.35-45.
Tapadar, P., Andrews, D.W. and Pittea, A., 2019. A tale of two pension plans: Measuring
pension plan risk from an economic capital perspective.
Vlachantoni, A., Feng, Z. and Falkingham, J., 2017. Ethnic elders and pension protection in the
United Kingdom. Ageing & Society, 37(5), pp.1025-1049.
Woods, J.E., 2017. On the political economy of UK pension scheme regulation. Cambridge
Journal of Economics, 41(1), pp.147-180.
Woods, 2017.
7