A pension gives you an income in retirement. But there are other ways to save. The State Pension is one type of pension which is run by the government. There are other pensions which you can set up yourself or through your work – these are called personal and company pensions. There are other ways to save for retirement. Many people choose savings accounts, ISAs and other types of investments.
What can I get from the state?
The State Pension is a foundation for your income in retirement, so it’s worth knowing how much you stand to get. The amount of State Pension people get varies. In 2015-16, the full basic State Pension for a single person is £115.95 a week. That’s just over £6,029 a year. On top of this, you may also get an additional State Pension, but this
depends on your personal situation. Your total State Pension depends on your National Insurance record. You may build up State Pension when you pay National Insurance contributions, or are credited with or treated as paying National Insurance contributions. This can include time you spend caring for someone.
Having a personal or company Pension
The sooner you start putting money into your own personal or company pension, the more time you have for it to build up. You might choose to take out your own personal or company pension because:
1. you may get money back in tax relief
2. you may get additional contributions from your employer
3. you can lock your money away until you retire
What is a personal pension?
With a personal pension you pay a regular amount, usually every month, or a lump sum to the pension provider who will invest it on your behalf. The fund is usually run by financial organisations such as building societies, banks, insurance companies or unit trusts.
Would a personal pension be good for you?
Your decision will largely depend on how much you can afford to save for your pension and how much you will get from other pensions. Personal pensions may be suitable for:
1. people who are self-employed
2. people who are not working but can afford to pay for a pension
3. employees whose employer does not offer a company pension scheme
4. employees who have the option to pay into a company pension, but choose not to
5. employees on a moderate income who wish to top up the money they would get from a company pension
A personal pension may not be the best choice if:
- your employer offers a company pension scheme
- your employer offers a workplace pension
- your employer offers access to a stakeholder pension scheme with an employer contribution
Paying your personal pension
Did you know that other people can pay into a personal pension on your behalf? This means that partners or other family members can help you save for your retirement. Or you could take out a pension for your children or grandchildren.