8 things you need to know about pensions
Planning for retirement can sometimes be scary. This is why we’re changing the State Pension to make it much clearer in the future.
Here are 8 things you need to know about pensions:
1. The new State Pension will be simple and clearer
The current State Pension is complicated.
The changes will allow people to know early on how much to expect when they reach State Pension age. This will make planning for retirement easier.
Want to know more? Go to – www.gov.uk/yourstatepension
2. The new State Pension, like the current system, is based on National Insurance contributions
Most people build up National Insurance (NI) either through working or by receiving credits through certain benefits.
Your NI is used to calculate how much State Pension you get.
The full rate of the new State Pension will be no less than £151.25 a week. The actual amount will be set before April 2016.
But not everyone will get the same amount. In the early years of the new State Pension your NI record from the old scheme will be taken into account.
Read more about the changes. Go to – www.gov.uk/yourstatepension
3. If you take time off work to care for a relative or child you don’t have to miss out
National Insurance (NI) credits can help to fill gaps in your NI record if you aren’t working or don’t earn enough to pay NI contributions.
Many people who are eligible for credits get them automatically. But some, like carer’s credits, need to be applied for.
4. Aged 55 or over? You can get a personalised new State Pension statement
If you’re 55 or over you can check how much State Pension you may get under the new system.
It’s easy to get a State Pension statement.
5. You can easily check when you’ll reach State Pension age
Use our State Pension calculator to work out the precise date.
6. We’re ending the complicated ‘contracting-out’ system
You may have been ‘contracted-out’; this was where you gave up the right to the additional State Pension in return for paying less into the National Insurance (NI) system. This may have happened if you have a private or workplace pension.
But from April 2016, contracting-out will end – and so will the reduced NI rate that contracted-out employees get now.
Whether you’ve been contracted-out or not, if you have 30 years on your NI record at April 2016, you’ll get at least as much from your contributions under the new State Pension as you would have under the old system.
7. It pays to join your workplace pension
Most people wanting to maintain their living standards into old age will need to have their own private provision as well, normally in the form of a workplace pension.
We’ve made it easier for you to do this by getting employers to automatically enrol you into a workplace pension, if you’re eligible. You can opt out if you think that pension saving isn’t for you.
And it pays to save – your boss will also pay towards it and you get tax relief.
Find out more about workplace pensions.
8. It’s easy to get free and impartial guidance
Pension Wise is a free and impartial government service that helps you understand the options for your defined contribution pension as you reach retirement.
If you’re over 50 and are considering releasing some of the money in your scheme, visit Pension Wise
Not sure of your type of pension? Contact your provider or scheme administrator.