Pensions are, of course, designed to enable you to save sufficient money to live comfortably after you have retired from work. There are many different ‘tools’ used to save for retirement and the taxation and investment elements of pensions can appear baffling. We specialise in explaining, recommending and monitoring pensions for you. Below are the most common sources of pension to fund for your retirement.
The Basic State Pension – for people who have paid sufficient National Insurance contributions while at work or have been credited with enough contributions.
Additional State Pension – this is now the State Second Pension (S2P). Before 6 April 2002, it was known as SERPS (State Earnings Related Pension Scheme). From 6 April 2002, S2P was reformed to provide a more generous additional State Pension for low and moderate earners, carers and people with a long term illness or disability and is based upon earnings on which standard rate Class 1 National Insurance contributions are paid or treated as as having been paid. Additional State Pension is not available in respect of self employed income.
An Occupational Pension (through an employer pension scheme) – if your employer operates a pension scheme, it’s usually a good idea to find out about the benefits of the scheme.
A Personal Pensions Scheme (including Stakeholder schemes) – open to everyone and especially useful if you are self-employed or your employer doesn’t run a company scheme. In 2012, the government is planning to introduce reforms and all employers will be required to offer their employees, who meet certain criteria, automatic enrolment into a workplace pension – National Employment Savings Trust (NEST), formerly known as Personal Accounts. Employers will also be required to contribute a minimum of 3% of salary to these, which will be phased in gradually over four years. Employees will be required to make a personal gross contribution of 4% with tax relief of 1%. The final format of these accounts has not yet been agreed, and further information will be issued prior to 2012. It is not in an individuals best interests to wait until 2012 however, to begin planning for their retirement. Personal situations can be reviewed nearer to the time when more details are available.
State Pensions may not produce the same level of income that you will have been accustomed to whilst working. The full Basic State Pension is only £102.15 per week (2011/12) for a single person (though you would be able to claim means-tested state benefits if that was your only income). It’s important to start thinking early about how best to build up an additional retirement fund. You’re never too young to start a pension – the longer you leave it the more you will have to pay in to build up a decent fund in later life.
Please see the related documents for more information on Pensions and Retirement Planning.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE TAXATION ADVICE