The experts continually tell us we are not saving enough for our future retirement. According to a recent article in The Express on research carried out by Expert Pensions Claim, nearly half of those asked said one of their biggest pension concerns was that they wouldn’t have enough money to last them through retirement.  We all want a comfortable life in our senior years, but whether this will happen may depend upon just how much we are saving towards it. That’s why Citizens Advice Bracknell & District supports the Pension Awareness Campaign www.pensionawarenessday.com.

A pension is an investment that we should all make when we start earning, as it has tax benefits and aims to provide you with an income when you retire. The earlier you start saving, even if it’s a small amount which steadily increases throughout your working life, the better. You could then increase the contribution as you get older and/or have more earnings, or if you have a lump sum to invest. When you decide to retire, you will have a financial means to help support yourself on top of any state pension.

There are three main types of pensions: the state pension; a company or workplace pension; and a personal or private pension.

The state pension is a regular payment from the government most people can claim when they reach State Pension age and you’ll receive for the rest of your life. The amount of State Pension you’ll get depends on how many years of National Insurance payments (or contributions) you have made. This includes National Insurance contributions that you pay when you are working and contributions that are credited to you when you are unable to work, for example because you are a carer, bring up children, unemployed, or in poor health. See our article on the state pension for more details.

The state pension age changed in 2016, so to calculate when you’ll reach your state pension age, and how much you may get visit: www.gov.uk/calculate-state-pension.

A company or workplace pension scheme is a way of saving for your retirement through regular contributions deducted directly from your wages, before tax. Many employers also pay additional money into the scheme, often matching your contribution to a set maximum. The government also effectively pays into it, by giving tax relief. New rules brought in by the government in 2018 called for ‘automatic-enrolment’, which means that employers must enroll their eligible workers into a workplace pension scheme. (You can choose to opt out if you don’t want to be enrolled.)  If you are eligible for automatic enrolment, your employer has to make contributions into the scheme.

There are different types of workplace pension schemes with different benefits. It’s important to understand the differences so that you can work out whether or not the scheme is right for you, and what other options you may have.  See our article on workplace pensions for more details.

With a personal/private pension you make regular payments (contributions) into a pension fund, which is managed by a financial institution (pension provider). This is usually something you arrange yourself.  The pension provider invests your regular payments, for example in stocks and shares, on your behalf. You can get tax relief on your pension contributions. It’s best to get advice from an independent financial adviser before choosing a personal pension. Also see our article on choosing a personal pension.  For more information about how to find a financial adviser, see Getting financial advice.

What are the advantages of saving into a pension?

• You will have built up an investment that will help support you in your senior years.
• You will have received tax relief which is available only on pension contributions.
• If you are enrolled into a workplace pension your employer will usually match or better your contributions, sometimes significantly boosting the funding and subsequent growth of your pension.
• Your pension grows largely tax free, which can help to boost the amount you will have when you retire.
• You may be eligible to take 25% of your pension pot as a tax-free lump sum when you reach age 55. (This may be dependent on your pension scheme rules). You can do anything you like with your cash.

If you don’t have enough money when you retire

Once you have reached retirement age, if you are on a low income, you may be able to claim certain benefits.  You could try using a benefits calculator to see what you might be entitlement to. But you are likely to be better off if you’ve accumulated your own pension fund, either through workplace schemes or a personal pension, or both.

It’s never too early to start paying into a pension scheme!

Find out more:

www.citizensadvice.org.uk/debt-and-money/pensions

www.pensionawarenessday.com

Pensionwise

www.gov.uk/state-pension-age

The Money Advice Service

The Pensions Advisory Service

The Pensions Regulator