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Pensions

Pensions are of course used to provide you with sufficient money to live comfortably once you retire from work. There are many different ‘tools’ used to save fore retirement and the taxation and investment elements of pensions can appear baffling. Financial Advisers specialise in explaining, recommending and monitoring pensions for people. There are currently four sources of pension to fund for your retirement:

The basic state pension for people who've paid National Insurance contributions while at work or have been credited with contributions.

Additional state pension - This is now the state second pension. Before 6 April 2002, you built up SERPS (state earnings related pension scheme) pension. Both are available to employees earning more than a given amount (£79 a week currently*). Many people who are not working because they are caring for young children or, say, an elderly relative or because of disability or long-term illness are also able to build up state second pension (but not SERPS). Additional state pension is not available in respect of self-employment income.

An occupational pension through an employer's pension scheme - if your employer runs a pension scheme, it’s usually a good idea to join.

A personal pension scheme (including stakeholder schemes) open to nearly everyone and especially useful if you are self-employed or your employer doesn't run a company scheme

State pensions may not give you enough income to live in the style you've been used to when working. From 6 April 2004, the state pension is only £79.60 a week for a single person, £127.25 a week* for a married couple (though you would be able to claim means-tested state benefits if that was your only income). It's important to be thinking 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'll have to pay in to build up a decent fund in later life.

See the related documents for more information on Pensions and retirment planning.

*Source: DWP & Occupational Pensions, Issue 223, Decmber 2005.