The state pension is one of the many pensions’ schemes currently available in the United Kingdom. It consists of a regular payment from the Government based on one’s previous National Insurance contributions. Not everyone is eligible for the state pension. If you are a woman, you can choose this kind of scheme if you are born on or before 5 April 1953. If you’re a man, you have to be born on or before 5 April 1951. If on the contrary you were born after these dates you are eligible for the new state pension, which is another version of the same scheme. As a matter of fact, it doesn’t matter when you start claiming your pension, but when you reach the state pension age. Unlike all other pensions available to British citizens, who can access their money once they turn 55, the retirement age of the state pension is set at 66. In order to be eligible for this kind of pension you will also have to prove you have at least ten years of contributions. The monthly payments of the state pension are in fact based on your contributions. You also have the option to claim the state pension and keep on working, as long as you remember some important rules. For instance, the money you earn won’t affect your fund, but may turn you not eligible for some benefits. Also, being the state pension taxable, you might end up on a higher tax band. You also have the option to defer your state pension. Check this link to go deeper into this matter https://blog.moneyfarm.com/en/pensions/deferring-state-pension/.
What are the other main types of pensions in the UK?
The state pension isn’t the only retirement scheme available in the UK. As a matter of fact, British residents have a wide choice regarding the many types of pension funds available in the country, each of which has been intended to meet the needs of many people. Every pension fund currently available is different from the others. However, there are some rules that apply to every single one of them. For instance, when opening a pension fund, you have to keep in mind that your savings won’t be available for you until you reach the retirement age. This way, you won’t be tempted to withdraw before the time and you’ll be sure to put aside a significant amount for your future. Also, the Government will always contribute to your pot through tax relief. Let’s take a closer look on the main categories of retirement plans available in the United Kingdom.
The workplace pension
The workplace pension is currently the most common type of retirement scheme available in the UK. It has been designed to help employees to save money for their future. By opening this pension fund, your employer will monthly contribute to your pension pot by paying you a little more. You will have to raise your contributions as well. The government will contribute too by applying tax relief. You can choose between the defined contribution pension scheme and the defined benefit pension scheme. By opening the first one, you and your employer to monthly deposit a minimum amount. Your savings will be then invested by the pension provider, giving them the chance to grow. Remember that investments are risky and there’s always the chance to end up getting less than expected. The second kind will give you access to a pre-established amount, which will depend on your working years and on how much you deposited every month, as soon as you turn 55.
The personal pension
A personal pension has been designed for independent workers, but actually anyone can open it. By choosing this scheme you’ll be free to choose how much to deposit, how often and where to invest your money. However, just like all investments, it comes with risk and your capital may grow as well as go down.