There are a number of different pension products available on the market, each with their own pro’s and con’s so it is important to find the right product to fit your requirements. Below is a summary of some of the pension products available to you. If you are unsure which pension type is right for you, it is advisable to seek professional advice from a pensions adviser.

 

The state pension is available to all UK citizens who have met the required number of “qualifying” years earned over your working life. Qualifying years are based on the National Insurance contributions you have paid, or have been credited with over your working life.

If you reached state pension age before 6 April 2010, then if you are male you needed 44 years of contributions to be eligible, while females needed only 39 years to qualify for a full state pension. However, this changed for people reaching state pension age on or after this date.

The government’s new Pensions Bill reduces the required number of eligible years of contributions to qualify for a full basic state pension to just 30 years for both men and women who reached state pension age on, or after April 6th.

 

The current state pension is made up of two parts, the basic state pension (£95.25 per week, or £152.30 for married couples) and, for carers, those on low earnings, or those with long-term disabilities, the state second pension (S2P).

The amount you receive from S2P depends on your salary, the number of years you have been making National Insurance Contributions and whether or not you ever opted out of the state second pension. It is worth noting that if you are self-employed, you are not eligible for the S2P.

 

Company pension schemes are typically either money purchase, group personal pension (GPP), or the increasingly rare final salary schemes. If you are presented with the opportunity to join one of these schemes then it is recommended that you do so.

For final salary schemes, the amount of pension you receive is based on your final salary and the number of years you have been a member of the scheme.

With money purchase and GPP schemes, the money you pay into a retirement fund is invested in order to grow the value. Your employer will also make contributions to the scheme to complement your own pension payments. Upon retirement, the retirement fund is used to buy your annuity.

As your employers make contributions on top of your own, opting out of one of these schemes is effectively the same as refusing additional pay, so it makes sense to be involved.

 

If your employer does not offer a company pension to which they make contributions, or if you are self-employed, you may opt to arrange a personal pension or a stakeholder pension.

These types of pensions can be arranged directly through an insurance or pensions company, or through your financial advisor.
With personal and stakeholder pensions, you are the only contributor to the scheme. However, you will receive tax relief on the money you pay in, meaning the amount your contributions will be increased by an amount equal to basic rate tax.