How much income will you have in retirement?
As you approach retirement you'll need to look at different sources to estimate how much income you'll have. These include the State Pension, personal or workplace (occupational) pension schemes, state benefits you may qualify for on retirement and your savings or investments.
If you're entitled to the basic State Pension you can claim it when you reach State Pension age – even if you continue working.
The full basic State Pension is £113.10 per week in 2014-2015.
You may also be entitled to the additional State Pension (also known as the 'State Second Pension' and previously called the State Earnings-Related Pension Scheme, or SERPS).
State Pension statement
A State Pension statement gives you an estimate of how much State Pension you may receive at State Pension age.
The estimate is based on:
- your National Insurance contributions to date
- assumptions about future contributions you may make before you reach State Pension age
- Getting a State Pension statement
Putting off your State Pension claim
You don't have to claim your State Pension as soon as you reach State Pension age, whether or not you continue working. If you defer claiming you can receive a higher weekly amount or a lump-sum payment plus your State Pension.
Annual benefit statements for your personal or workplace pensions
The trustees or managers of personal and some workplace pension schemes must send you a statement each year about your pension.
If you have a defined benefit (salary-related) workplace pension you can request an annual statement. Some pension companies send statements automatically. If you have a defined contribution (non salary-related) workplace pension you must receive an annual statement. For defined contribution schemes the statement may include a forecast of how much you could get when you retire. If a forecast isn't included you can ask for one.
Personal pension or non salary related workplace pension
The amount you'll get from your personal pension and any non salary related ('money purchase') workplace pension will depend mainly on:
- how much you've paid in and how well it was invested
- the age at which you retire
- whether you make provision for a survivor's pension
Salary related workplace pension
The amount you'll get from a salary related workplace pension will depend on:
- the number of years you've been a member of the scheme
- your salary – usually when you retire or leave the scheme
Whatever type of scheme you belong to, you may be able to take part of the fund as a tax-free lump sum. However, if you do this it will affect the amount of your pension.
Tracing a personal or workplace pension
The Pension Tracing Service is a free service that can help you find a lost workplace or personal pension scheme.
You can contact the Pension Tracing Service:
- Telephone: 0845 6002 537 (+44 191 218 2466 from outside the UK)
- Textphone 0845 3000 169.
You can also complete a tracing form on The Pension Service website.
- Pension Tracing Service - trace a personal or workplace pension scheme
- Complaining about problems with your pension scheme
Benefits from retirement age
The government offers various kinds of financial support for those in retirement - it's worthwhile finding out if you will qualify. Some benefits are income related.
Pension Credit is an income-related benefit for those living in Northern Ireland who have reached the minimum qualifying age. In 2014-2015 it guarantees a minimum weekly income:
- £148.35 for a single person
- £226.50 for a couple
If your income in retirement is less than this, you can get top up payments to bring you up to the guaranteed level.
The age from which you can get Pension Credit Guarantee Credit is gradually increasing in line with State Pension age. To find out when you may be able to apply for Pension Credit, you should use the State Pension age calculator.
Other income-related benefits
You may also be entitled to other income-related benefits including:
- Housing Benefit
- Cold Weather Payment
- help with funeral costs
- help with health costs
- help with rates
Benefits not related to income
Some benefits are available whatever your income, including the Winter Fuel Payment, disability payments, attendance allowances and bereavement benefits.
Income from other sources
Long-term savings and investments you have can provide extra income in retirement, but when taking these into account you should be aware:
- savings interest rates can fall as well as rise
- the return on investments is not guaranteed
- your investments will need to match your particular needs
- some investment and savings products are more tax efficient than others
When reviewing or taking out investments consider getting advice from an authorised financial adviser – you have less protection if you buy without taking advice.
Tax in retirement
When you retire you still pay Income Tax if your taxable income is more than your allowances. Income from pensions (including the State Pension) is taxable. However, your personal allowance increases and you don't pay National Insurance contributions after you reach State Pension age, even if you continue working.