Retirement Pension UK
In the United Kingdom, the state retirement age is 65 years for men and 60 years for women. However, with the phase of time the retirement age for both the sexes will gradually increase to 65 years, for those who are born after 6th April 1950. After 2024, the age will gradually be increasing on the basis of 2 years per decade. So, with these changes you need to plan your retirement investment in order to get the maximum benefit from the state pension. The longer will be your contribution; the better would be the return on investment.
UK Pension – A General Overview
Pension is great way of saving your hard earned money, so that you can get some additional fund to keep you financially stable, when you stop working. You can build up your own savings plan or get a pension plan via your employer. If you are opting for the latter, you need to contribute a part of your income to the employer’s scheme. Retirement planning should be made in such a way that you can get the maximum annuity benefits (the lump sum that is built up over the years in your pension find). Depending on the type of pension plan, you can enjoy a lot of UK tax benefits. Whatever contributions you will make toward the pension fund, you will enjoy tax relief on that amount. According to retirement pension 2011 plan, if you are earning less than £150,000 annually, then you will be able to take twenty-five percent of your pension investment as a tax free amount at the time of your retirement.
There are three major pension plans in the UK. These are as follows:
Personal Pension: You can avail personal pension from life insurance companies, banks and building societies. These organizations will invest your savings and you can also get tax relief on the amount you put into the pension fund annually. One special type of personal pension is the stakeholder pension, which needs to be met some legal standards, so that these can have a limit on the management charges each year. This type works just like any other pension funds. You need to put money into the fund and the manager of the stakeholder scheme also needs to invest on your behalf into the fund. It is best to make regular payments so that you can get the maximum value on your investment. You can also stop making contribution whenever you want, without paying any penalties. When you attain the age of retirement, you can use this fund to buy an annuity from any insurance company of your choice.
From other personal pension plans, these types offer more security, flexibility and a limit on annual management charges. Managers can charge a fee of only one and half percent of your invested money annually, for the first ten years you hold the product, and after that only one percent.
State Pension: If you have enough qualifying years from your NI (national Insurance) contributions, you will be eligible to get this pension. You can be eligible for a state basic pension or additional state pension. As the age you receive this pension is changing, you need to find whether or not you are eligible by taking help of free online calculator to know your state pension age. You can also use the state pension profiler in order to estimate how much pension you have built up over the years and when is the appropriate time to claim it. This tool will also show whether or not you have been affected by the recent pension reforms. In the year 2011-2012, in order to be eligible for a state pension, you need to have a minimum income of £5,304 if you are working in a company and a minimum of £ 5,315 if you are self-employed. The number of qualifying years to get a full state pension depends on an individual’s age and sex. For a man born before 6th April 1945, it is 44, whereas for a man born after this is 30. Similarly, for a woman born before 6th April 1945, the qualifying years is 39 and for those who are born after this date, it is 30.
With an additional state pension, you can get extra money in addition to your basic state pension. This is earlier known as the SERPS (State Earnings Related Pension Scheme), but now known as State Second Pension. You will be eligible for this pension, if you are employed, caring for someone or looking after a child.
Company Pension: These pension plans are set up by employers to provide monetary fund for the employees on retirement. These are also popularly known as workplace pension or occupational pension. Though the rules of contribution vary from one company to another, all organizations follow one of the three basic regulations. The pension can be paid by equal contribution from both the employer and employee, it can be paid from your salary only or it can also be paid from the employer only. The amount you will be putting into the annual allowance, will be tax free. From the year 2012, there will be a new way of income saving. Under this system, your employer will automatically enroll you into a pension, provided you are already not into any other pension scheme. Company pension can be further classified into salary related scheme and money purchase scheme. In the former type, the money you get will be based on your salary and the number of years you are into the scheme. However, the latter type is based on how much less you have paid into the scheme and how well planned the money has been invested.