Preparing yourself for retirement is more important than ever as people are living for longer and having healthier lives. There are different types of pension scheme so making sure you choose the right one in which to invest as it can affect the amount you have to support yourself when you reach state pension age. There tends to be three terms that are used by the government to describe these different types of pensions as Personal, Stakeholder or Occupational. Each one has different benefits and ways in which your final pension amount is decided, the main pension scheme is the basic state pension that everyone that has paid National Insurance through out their working life is entitled to when they have reached the retirement age. Here are some details on the basic schemes and how they work:
Basic Pension – The way in which the Basic Pension and whether you qualify to claim it is decided by how many years you have been paying NI. These payments are classed as National Insurance Credits and you will require to have been getting paid at least £4,368 per annum to be classed as paying these NIC’s, and the number of years that you have to have been contributing varies, at the moment as women and men have different retirement ages, but for women at the minute it is between 39 and 44 years and for men it is 44 years of contributing (the retirement age from 2020 will be the same for men and women, 65). The number of working years may be reduced if you have faced a situation whether it is illness, becoming a carer for somebody etc. and it has meant you have been unable to work. The Government will either reduce the number of years or add National Insurance Credits for you this hopefully helping you reach the required number of credits you need for claiming the state pension. There are a lot of people that have false preconceptions that everybody is in fact entitled to a state pension when this is not the case, this is why its important for you to understand fully the process that is carried out in order to decide whether you are entitled and how much your end pension will be.
The different types of pension you can get Personal, Stakeholder or Occupational and each works in a different way Occupational Pension is also known as a Company or Work Pension and means that usually the member pays a certain amount in but the employer pays an amount on top of what the member pays there fore increasing the end amount for the pension. A Stakeholder Pension is basically where the money you contribute for your pension is used to invest meaning you could end up making money off your contributions. A Personal Pension is similar to a Stakeholder Pension in the way your contributions are invested but you can use a Personal Pension to top up what you will receive from an Occupational Pension or if your company doesn’t offer a pension scheme or if you are self employed you may choose a Personal Pension to save for your pension. If you are unsure of which would be best suited to your income you will be able to receive advice off a Financial Advisor or decide for your self by looking at details of different ones on line.