Pensions | Finance

Why pensions are important:

  • It’s like getting a pay rise, your employer will contribute if you do
  • It’s difficult to get by on just a state pension
  • You get tax relief on your pension meaning that as a basic rate taxpayer you will get 20% back on top of your pension

Pensions are provided to ensure that when you retire you have a level of income to support you in later life, there are two main types

State Pension

This is provided by the Government and is linked your National Insurance record, to qualify you will normally have had to have at least 10 full qualifying years in order to get a state pension when you retire (the age at which you can retire is changeable and is currently 65, but will increase to 66 in October 2020, it is further scheduled to rise further by 2028 to 67).

The current state pension is £168.60 per week but again this will change over time.

Company Pensions

Companies now have a legal obligation to offer their employees a company pension scheme, the most common pension scheme is Auto Enrolment whereby you will put a % of your salary into a scheme and the employer will match it. Currently the contribution levels are set at 3% employer contribution and 5% employee contribution. You will be registered with a scheme automatically if you are;

  • Aged between 22 and state pension age
  • Earn more than £10,000 per year
  • Usually work in the UK

You are however able to opt out of this scheme providing that you advice your employer and the scheme.

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