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pensions

A very special form of saving is called a Pension and is a very long term type of savings. Although you cannot get a pension until you are older, it is very important that you think about saving for a pension as early as possible.

what is a pension?

A pension is simply a source of regular money to live on in your retirement. It comes from the assets of a pension scheme – a type of savings account, with tax benefits – that you pay into during your working life. They are one of the most tax-efficient ways to save money.

when should I start thinking about a pension?

Most people need a pension when they retire so it is vital that you think as early as possible about whether or not you need to save more for your retirement. Why? Because you may need money for your increased leisure time and more people are living longer.

By reviewing your pension arrangements regularly from a young age, you will increase your chances of getting the retirement income that you want, or need.

types of pensions

With many different types of pensions to choose from, you may find it difficult when trying to choose the right one for you.

Pension	Details
Basic State Pension	This is a pension paid to anyone who has paid enough National Insurance (NI) contributions, has been treated as having paid enough or who has sufficient NI credits, and who has reached State Pension age currently 60 for women and 65 for men at present. However, women’s State Pension age is set to increase from 2010 to equal men’s by 2020.To obtain a full Basic State Pension men will need to have paid or been treated as having paid NI contributions (or have credits) for a minimum of 44 years. Women will need between 39 and 44 year depending on their State Pension age. Women – Find out your State Pension age on the Pension Service website
Additional State Pension	This is a ‘top-up’ pension and is based on actual earnings. If you are working you will have to contribute towards this unless you ‘contract out’ into a personal or occupational pension scheme.
Occupational Pension Schemes	Many employers set up occupational pension schemes for their employees. The details of these vary considerably, but generally the employer will make a contribution as well as the employee. Some schemes are compulsory and others you can opt into or not. You should seek advice from an Independent Financial Adviser before making a decision about whether or not to join an occupational pension.
Personal Pensions	Individuals can take out a personal pension whether or not they are in work, as long as they are aged 18 to 75. The details of the various pension schemes available will vary depending on the company offering them – it is a good idea to take advice from a reputable Independent Financial Adviser before committing yourself.
Stakeholder Pensions	These are low-charge, flexible and portable personal pensions. They are designed to encourage as many people as possible to start a personal pension. The charges for the pension are low and it is relatively easy to stop and restart payments if necessary. Any firm that employs five or more employees or doesn’t offer a good value pension scheme must offer a stakeholder pension scheme.

what will you receive from your pension?

The amount you will receive will vary from person to person, depending on how much you invest and for how long. The following chart will give you an idea of what you can expect to receive from each type of pension.

Pension	Benefit
Basic State Pension	The amount a full Basic State Pension is worth varies, but a single person who has paid, been treated as having paid, or credited with all the necessary National Insurance contributions can expect to receive £79.60 per week.
Additional State Pension	The amount you will receive will vary depending on how much you earn – and thus how much you contribute. Basically, the more you contribute, the more you will receive.
Occupational Pension Schemes	Normally can only be taken on retirement date – often aged 60 or 65 depending on the company. The benefits will vary from company to company – get information from your employer and take advice from an Independent Financial Adviser.
Personal Pensions	Pension can be taken at any time between the ages of 50 and 75. A tax free lump sum of up to 25% of the value of the pension fund. The remainder of the fund must be used to buy an annuity that gives a regular income. You will need to take advice on which annuity to buy.
Stakeholder ensions	Pension can be taken at any time between the ages of 50 and 75. A tax free lump sum of up to 25% of the value of the pension fund. The remainder of the fund must be used to buy an annuity that gives a regular income. You will need to take advice on which annuity to buy.

more information and help

To find out more about pensions you can obtain information from an Independent Financial Adviser (find one on www.unbiased.co.uk). Other information about pensions can be found on the following sites:

	www.thepensionservice.gov.uk
	www.dwp.gov.uk
	www.fsa.gov.uk

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