Types
of pensions
Occupational Pensions
The company you work for
may arrange to provide you with an Occupational Pension
upon your retirement. Usually these
type of pension plans are set up to provide you with
income after you retire, as well as death benefits for any
dependants
you may have. In some plans, your beneficiaries will
receive a tax-free lump sum upon your death.
Occupational
Pensions and the State Pension
 If the company you work for
does not provide occupational pension, or you do not qualify
for it, you can build
up additional State
Pension on top of your basic State Pension. If you do
have occupational pension, you are still entitled to your
basic
State Pension. You also have the option to waive your
additional State Pension and choose to only receive your
basic State
Pension plus your occupational pension. By doing
this, you might be
able to build up your entitlement to a modest State Second
Pension. Many people with occupational pension schemes
prefer to avail of this option.
Stakeholder Pensions
On top of your State Pension,
you can choose to buy a stakeholder pension as a supplementary
source of income in order
to assure a certain quality of life once you retire.
Stakeholder pensions
are an inexpensive alternative for people who don’t
have occupational pensions, or feel that their personal
pensions
will not give them enough income to meet their future
needs.
Stakeholder pensions are ideal for people with
low to medium incomes at their current jobs. The
cap
for charges
is usually
at 1% with a £20 minimum monthly contribution.
In some cases your employer may make additional
contributions towards
your stakeholder pension.
Most insurance providers,
banks and building societies offer stakeholder
pension schemes. Trade unions
will usually also
have stakeholder pensions for their members.
Normally, companies are required to have stakeholder pension
options available
for their employees but some companies are exempted
from this. Some reasons for exemption are:
- If the company has less than 5 employees.
- If
the company provides occupational pension that any employee
can avail of after the first year of
employment.
- If company chooses to place a minimum 3%
of each employee’s
earnings into another type of non-state
pension for their employees.
Even if your company does provide stake
holder pension you may still choose to be contracted
out of your
additional State Pension. You will still
have to pay full-rate
National Insurance
Contributions but the Inland Revenue will
pay a rebate to
your stakeholder pension upon your retirement.
How much rebate you
can expect depends on your income and age
(i.e. you receive a higher rebate the older you are.)
If you
are self-employed, you may want to get a stakeholder pension
in order to supplement
the
basic state pension
you receive upon your retirement since
you will not be entitled
to any additional state pension.
Should you need to change stakeholder pension
providers downstream, you are free to do
so without being
charged any fees for
the transfer.
Tax Relief on Stakeholder
Pensions
You are entitled to tax relief on your
stakeholder pension contributions.
If you are in the
basic income tax rate
bracket, every £100 towards your
pension earns a £22 rebate.
(The highest tax bracket earns a rebate
of £40.)
What is the most I can
contribute?
The maximum contribution
allowed per year is normally £3,600.
This includes contributions made
by your employer plus any tax relief from the Inland
Revenue. This does not include the
National Insurance rebate for choosing
to be contracted out of additional
state pension. If you prefer to contribute more,
please refer to leaflet “IR3 – Personal
Pension Schemes – a guide for
members of tax approved schemes” from
the Inland Revenue. State Pensions
State Pensions are provided by
the Government. The pension is paid for by National Insurance
Contributions
made during your active employment in the workforce.
For
more about National Insurance Contributions, visit
the Inland Revenue website
at http://www.inlandrevenue.gov.uk/nic/index.htm.
For
women, the State Pension age to sixty-five starting April
6, 2020
to
be consistent
with the current State
Pension age
for men. The increase will start
gradually beginning 2010. Women
born before April
6, 1950 are not
covered by the
change and are entitled to State
Pension from the age of sixty.
In
some cases you may not be able to receive your full State
Pension
based
on your own
NI record
and instead
you will
need to have your husband’s
NI record used as a basis. This
only applies if you are at least
sixty years old and your husband
is already receiving State Pension.
If
you are divorced, your former
spouse’s record may
be used as a basis in case
your own NI record is not enough
to
grant you full State Pension.
You
can choose to keep working
after claiming your State
Pension. Your
income from your
work will
not have any
bearing on the
amount of State Pension you
will receive but it will
be taken
into account for
any extra
pension you may
claim for your
dependents.
For widows or
widowers, a State Pension based on your
spouse’s
NI record is possible or
your State Pension may
be based on your spouse’s
additional State Pension.
For more information regarding
this, please refer to http://www.thepensionservice.gov.uk/atoz/atozdetailed/addstatepen.asp.
War
Pensions
There are several
categories that qualify for War
Pensions:
- Civil Defence Volunteers (CDV) disabled
in the line of duty.
- Injured or disabled members of Her
Majesty's (HM) Armed Forces, including The Ulster Defence
Regiment (now known
as the Royal
Irish Regiment),
the Home Guard and nursing and auxiliary services.
- Merchant
seamen, Naval auxiliary services or coastguards that
suffered disability due to injury, or disease due
to conditions
during wartime.
- Prisoners
of War
- Polish Forces under British Command who
served during World War Two
- Polish Resettlement Forces injured
or disabled through service.
- Civilians disabled as a
result of enemy action in World War Two.
Note: You cannot
make a claim if
you are
still serving
in HM Armed
Forces.
You may be entitled
to a War Widow/Widower’s
Pension if your
spouse belonged
to any one of the
categories listed
above.
War pensions
are
considered distinct
from State
Pensions. More
information is
available
from
the Veterans
Agency within the
Ministry of Defence:
Veterans
Agency
Norcross
Blackpool
FY5 3WP
Helpline: 0800
169 22 77 (
8.15am to
5.15pm Monday
to
Thursday,
8.15am to
4.30pm Friday)
Text phone:
0800 169 34
58
Fax: (01253)
330 561
Email: help@veteransagency.mod.uk
Website: http://www.veteransagency.mod.uk/
|
