Retirement

  • Pensions 101
    • Throughout our working lives we are likely to spend the majority of our income on the essentials of life. After you have paid your National Insurance contributions and Income Tax out of your pay packet there is only so much left, after all. From this, you must also pay the rent or mortgage, utility bills, clothing, food and everything else. At times, it can seem like there is no room left for savings. However, unlike other forms of saving, pensions can be beneficial because - if deducted from your pay - it is often done before you are taxed, meaning that you are frequently able to tuck that little bit more away, as a result. When retiring, you will need an income to cover your daily expenses. The state will provide pensioners with a pension, but this is a relatively low amount which covers little more than the essentials. In the future, the UK's state retirement age will go up and, depending how old you are now, it could rise significantly from the old ages of 65 for men and 60 for women. Already in place is a mechanism to align the retirement age of both men and women.
  • The State Pension
    • As of 2014, the full entitlement under a basic state pension is £113.10 per week. However, it is important to note that the amount of pension you might get from the state depends on the number of National Insurance contributions you have made during the course of your working life. It will also sometimes relate to those of your current - or former - spouse. If you have had a break in your career - perhaps for raising a family - it is important to inform HMRC of the reason so that any gaps in your National Insurance contributions can be accounted for. Self-employed people are responsible for paying their own contributions directly but employed people can expect their employer to do this for them within their payroll function. Payment of the state pension is usually automatic for UK citizens who reside in the European Union. However, if you are not getting your entitlement, it is a good idea to contact the government's Pension Service claim line on 0800 731 7898.
  • Workplace Pensions Schemes
    • Many large employers have offered workplace pension schemes which they administer on behalf of their employees for years. Recently, all employers have been obliged to offer such schemes to their employees and you should have been enrolled automatically even if you are only making the minimum contributions. Over time, the contributions will add up to a total which you can call upon at the time of your retirement - usually state retirement age. The funds are invested on your behalf by a pension company under the direction of a pension fund manager. This means that the savings should grow offering you a bigger pot at the end than simply setting the money aside yourself. Although pension funds are managed responsibly, they can go up and down, just like any other form of investment. Some employers match employee contributions up to a certain level, making them highly advantageous ways of saving.
  • Personal Pensions
    • Personal pensions work in very similar ways to workplace schemes nowadays, with the exception that contributions are not made from your salary directly and with no employer top up. The payments are invested for you and some schemes offer you the opportunity to select the amount of risk you want to be exposed to - which can lead to greater growth in some cases. Personal pensions are highly beneficial for self-employed people who are looking to save for their retirement in tax efficient way.
  • Annuities Explained
    • When you come to call on your pension, the pension provider should have already given you the full details of the amount that has been saved. Many people choose to purchase a financial product called an annuity with this pot. There is no set price for an annuity. The size of the annuity relates to the amount of the available funds. The more you save, the greater the value of the annuity that it is possible to buy. An annuity, as the name suggests, allows you to convert a capital sum into an annual income. In other words, the product releases money to you during retirement in regular instalments. If you live long enough, the annuity paid could feasibly exceed your pension savings. However, it might be less, if the reverse is so. The advantage of an annuity over simply taking all of your retirement savings in one go is that you can plan for a steady stream of income without worrying about further investments versus spending.
  • When To Start Saving
    • The time to start saving for your retirement is now, whether you are already in your sixties or have just left school. The longer you have to save, the better because the amount of growth you can expect from a pension fund will be that much more. However, it should be said that it is never too late to build a pension pot which can support your basic state pension and allow you a little extra spending power after you finish working. Payments into a company pensions will either come from employer contributions, deduction straight from employee salary or a combination of both employee and company contributions. Tax relief is also available through company pensions up to the annual allowance. The general benefit to a company pension is that the fund will be chosen wisely and employees will benefit from increased contributions due to employers paying into the fund.
  • Resources