Plan your retirement income
1. Overview
A pension is a way to save money and will give you an income later in your life.
You can get a pension from schemes you pay into and from the government.
Some pension schemes let you also take a lump sum.
Check how much money you’ll need when you retire
You may need more money than just the State Pension when you retire.
The maximum basic State Pension you can get at the moment is £113.10 per week for a single person.
How much a pension could be worth
Use the Money Advice Service's pension calculator.
It shows you:
- what you can expect to get from a pension, whatever age you start paying into one
- what would happen to the value of your pension if you delay for 1, 2 or 5 years
2. Your pension options
You can pay into as many pension schemes as you want. It depends on how much money you can set aside.
When you pay into a pension scheme the government will automatically add tax relief - as long as you don't pay in within a tax year more than the higher of:
- your total annual income
- £40,000
If you pay in more than that, you'll usually have to pay tax on the additional amount you pay in.
Private pensions
| Pension | What it is |
|---|---|
| Workplace pensions | Arranged by your employer. Usually both you and your employer pay into it. You get a regular income and/or a lump sum, either from a pension that's been invested in the stock market or from your employer’s pension provider, depending on the type of scheme your employer offers. |
| Personal and stakeholder pensions | A private pension that you pay into. Employers can also pay into them as a workplace pension scheme. What you get depends on how much is paid in and how well the investment does. |
State Pension from the government
| Pension | What it is |
|---|---|
| Basic State Pension | The basic State Pension is a regular payment you can get from the government when you reach State Pension age. The amount you get depends on your National Insurance contributions and credits. The maximum you get is currently £113.10 per week. |
| Additional State Pension | An extra amount on top of your State Pension. Not a fixed amount. How much you get depends on your earnings and whether you claim certain benefits. |
| Pension Credit | For people on a low income. Currently credits are worth £148.35 (singles) or £226.50 (married or in a civil partnership) per week. You may get more if you’re a carer or severely disabled. |
3. Private pensions
Workplace pensions and personal or stakeholder pensions are a way of making sure you have money on top of your State Pension.
For most workplace and personal pensions, how much you get depends on:
- the amount you've paid in
- how well the pension fund’s investments have done
- your age - and sometimes your health - when you start getting the pension
Workplace pensions
If your employer offers a workplace pension, they can make contributions on top of what you pay. Many employers do.
You may also be able to make extra payments to boost the pension.
Workplace pensions are protected against risks.
The government is bringing in changes to the law on workplace pensions. By 2018, your employer must automatically enrol you in a scheme if you're over 22 and under State Pension age and earn more than £9,440 a year.
Personal and stakeholder pensions
These are private pensions. Stakeholder pensions must meet certain standards set by the government.
Some employers may offer you these pensions as a workplace pension.
You might want to get a personal or stakeholder pension to save extra money for retirement to top up your workplace pension.
Self-employed people without a workplace pension scheme might want to pay into a personal or stakeholder pension.
If you’re not working but can afford to pay into a pension scheme, this type might also be an option for you.
You automatically get tax relief on your pension contributions.
Find a lost pension
The Pension Tracing Service might be able to trace lost pensions that you’ve paid into.
4. Pensions from the government
The Basic State Pension
You get the full basic State Pension if you’ve paid or been credited with at least 30 years' worth of National Insurance contributions or National Insurance credits before you reach State Penson age.
The full basic State Pension is currently £113.10 a week.
If you don't have 30 years when you're approaching State Pension age, you can pay voluntary contributions to make sure you're getting the full amount.
Use the State Pension calculator to find out how much State Pension you could get now.
The Additional State Pension
This is an extra amount you may get on top of your Basic State Pension. It's also based on the amount of National Insurance contributions you've paid or had credited.
You can choose to contract out of the Additional State Pension if your employer offers a ‘contracted out’ workplace pension scheme. Ask your employer if this applies to you.
You can't get the Additional State Pension if you're self employed.
Getting more State Pension
Topping up your State Pension
You can get up to an extra £25 per week on top of your State Pension if you reach State Pension age by 6 April 2016. You'll be able to make a lump sum 'Class 3A voluntary contribution' between 12 October 2015 and 1 April 2017.
Deferring your pension
When you reach State Pension age you have the option to defer your State Pension (delay payments). By doing this you might get up to £595 extra for every year you defer.
Pension Credit
Pension Credit is for older people on a low income to make sure they get a minimum weekly amount. You'll have to apply and all your sources of income (eg savings) will be checked to make sure you qualify. Getting Pension Credit may mean you're eligible for other benefits too.
You're over 80
People over 80 with little or no State Pension can apply for a payment of £66 per week from the government through the Over 80 Pension.
5. Working past State Pension age
You might decide that you don't want to stop working when you reach State Pension age.
If you do, you pay less tax when you keep working past your State Pension age.
The law protects you against discrimination if you're over State Pension age and want to stay in your job or get a new one.
Staying in your job
There is no official retirement age and you usually have the right to work as long as you want to.
There are, however, some circumstances when employers may have the right to set a compulsory retirement age that they choose.
Your employer can't make you redundant because of your age.
Getting a new job
When applying for a new job you don't have to give your date of birth if you don't want to and employers can't ask you to give this information.
Employers also can't set an age limit for a job, unless they can justify it (eg because of certain physical abilities) or it's a limit set by law (eg for the fire service).
You might want to think about working flexibly when you're older.
6. Get financial advice
When planning your pension and retirement income you might need help with:
- choosing a personal or stakeholder pension
- planning your savings
- choosing how you want to get your retirement income
- delaying your State Pension payments (deferring)
Where to get advice
You can get free guidance on your retirement savings options from:
You can find an independent financial adviser:
- on the Unbiased website
- from the Personal Finance Society
You'll usually have to pay for this advice.