Types of UK Pensions - government, occupational, stakeholder pension schemes
TYPES OF PENSION
There are many different types of pension, and each one should be considered when reviewing your income in retirement.
How much am I allowed to save ?
Probably not a question that many in their thirties and forties may be asking, however once people find their level of disposable income climbing a bit they may feel that they want to contribute more to their pensions. Due to the generous tax benefits, you are restricted to saving the maximum of: 100% of your salary, and £235,000 (2008/2009 tax year) and still receiving tax relief. You can contribute more than this to your pension, but you will not receive the tax relief.
Different type of Pensions
Basic State Pension
You currently get the full Basic State Pension if you have paid National Insurance Contributions (NIC’s) for most of your working life. The number of years you pay NIC’s are referred to as qualifying years. If you do not have sufficient qualifying years, your state pension may be reduced.
The number of qualifying years that will be required from 2010 will be 30, currently men normally need 44, and women normally need 39 qualifying years to get the full State Pension.The age you can claim your state pension has also changed, this used to be 65 for men and 60 for women, however the age for women born on or after 6 April 1950 is rising from 60 to 65 between 2010 and 2020. The State Pension age will increase for both sexes between 2024 and 2046.
The full basic state pension in the tax year 2007/08 is £87.30 a week rising to £90.70 in 2008/09. Once in receipt of your State Pension this will increase each year in line with inflation.
To find out what age you will receive your basic state pension log on to:
http://www.thepensionservice.gov.uk/resourcecentre/statepensioncalc.asp
You don’t have to claim your State Pension when you reach State Pension age; you can defer it if you don’t feel that you require the income at the time. If you decide to put off claiming State Pension, your options when you finally claim will depend on how long you put it off for.
Your basic State Pension is paid only to you, and can’t be passed on to someone else when you die. However, if you’d chosen to put off claiming your State Pension when you’d reached State Pension age, your widow, widower or surviving civil partner may be entitled to your extra State Pension.
State Second Pension (S2P)
Depending on your circumstances, you may be entitled to additional State Pension. This is also called the State Second Pension and used to be known as the State Earnings Related Pension Scheme (SERPS). As its name suggests, additional State Pension is paid in addition to the basic State Pension. Up to April 2002, entitlement to SERPS was based on your record of National Insurance contributions and your level of earnings as an employee.
SERPS (the State Earnings Related Pension Scheme)
was also known as the additional State Pension. It ran from 6 April 1978 to 5 April 2002 when it was reformed by the State Second Pension. A person who was in employment may have paid into SERPS.
was also known as the additional State Pension. It ran from 6 April 1978 to 5 April 2002 when it was reformed by the State Second Pension. A person who was in employment may have paid into SERPS.
SERPS is paid from State Pension age to the person who has contributed to the scheme. In some circumstances SERPS entitlement may also be inherited. Since 6 October 2002, the maximum amount of SERPS pension a person can inherit will now depend on the date that their late husband, wife or civil partner would have reached State Pension age.
On 6 April 2002, SERPS was reformed to provide a more generous additional State Pension for low and moderate earners, and to extend access to additional State Pension to include certain carers and people with long-term illness or disability. Any SERPS entitlement already built up is protected both for current State Pension recipients and for those who have not yet reached State Pension age.
Self Employed
If you are Self Employed you will not build up an entitlement to the State Second Pension. This is because Self Employed people do not pay class 1 National Insurance Contributions.Any additional State Pension will be calculated when you claim your State Pension.
This information has been underpinned by our Expert, Lorna Shields, Financial Adviser, CTFS Limited
This information has been underpinned by our Expert, Lorna Shields, Financial Adviser, CTFS Limited
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