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Pensions Explained

Pensions Explained

Saving in a pension is a good way of putting money away for the future to give you a better income when you reach retirement.

Why save in a pension?

In the UK when you reach State Pension Age you can get a regular payment from the government known as the Basic State Pension.

The most you can currently get is £115.95 per week. For many people, this may not be enough for them to afford the things they would like in retirement. So it’s a good idea to put money aside for the future while you work.

To find out more about when you will reach retirement age and how much money you may get from the Government, you can click on the link which will take you to the Government website’s State Pension Calculator

There are other ways of putting money aside for the future, such as bank savings accounts or ISAs, which you may have already considered.

Some extra advantages of pension saving


Pensions are one of the most tax-efficient ways of saving for retirement. What this means in practice is that if you work in the UK, the government will give you tax relief on your savings, which
will be added to your pension pot. And you may have the option to take a tax-free lump sum when you retire.
 
Find out more about Tax Relief on pension saving


If you are a UK-based worker your employer may add extra money to your pension pot, on top of what you put in yourself. This is more likely since the Government introduced new worker pension rights in 2012.  

Find out more about pensions reform and the new Automatic Enrolment legislation
The money you save in your pension pot can’t be taken out until you reach retirement age. Although this may sound less flexible, for many people it’s very reassuring to know that however their circumstances change, the money they’ve saved will be there for them when they retire and they won’t have to rely on the State Pension alone.     The money paid into a pension is invested with the aim of making it grow so that it's worth more when you retire. Once you reach retirement age the money is yours and you can decide what to do with it. 

Pension Wise, the Government's new pension guidance service, provides a free impartial service to help you understand your options at retirement. It's available at www.pensionwise.gov.uk, by calling 030 0330 1001, or face to face.

How do pensions work?

It’s easiest to think of pension saving as a 3 step process:
 
Joining
Saving  

Retiring 
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