Pensions - an overview
When planning your retirement there are three main types of pension you need to consider. These are State Pensions, personal pensions and company pensions. Find out about these different types of pensions and how they affect you.
State Pension
State Pension is paid to those who are eligible, over State Pension age and who have claimed it. You may be eligible for the following types of State Pension:
- basic State Pension
- additional State Pension
Changes to State Pension age
The age you receive your State Pension could be changing. To find out if you are affected, see ‘Calculating your State Pension age’.
Basic State Pension - what is it?
Anyone who has enough qualifying years from their National Insurance (NI) contributions record is entitled to some basic State Pension.
Find out more about qualifying for basic State Pension and how much you can get in 'Understanding the basic State Pension'.
Or use the State Pension profiler to estimate how much basic State Pension you may get and when you can claim it. This simple tool will also help you see how you are affected by recent changes to the State Pension.
Important Information about the State Pension Profiler tool on the Direct Gov website - for customers resident in Northern Ireland
The information the Profiler gives you about the earliest date you may get you State Pension is based on recent changes included in the Pensions Act 2011. This Act is applicable to Great Britain only.
In line with normal Social Security arrangements a Bill making similar changes to the State Pension age timetable is currently being considered by the Northern Ireland Assembly. Subject to Assembly approval, the same changes will be made in Northern Ireland shortly.
You don't have to claim your State Pension as soon as you reach State Pension age. You can claim it later and get a higher weekly amount or take the option of a one-off taxable lump-sum payment in addition to the normal State Pension.
Additional State Pension
An additional State Pension can give you extra money on top of your basic State Pension. It is also sometimes called the State Second Pension (it used to be called the State Earnings Related Pension Scheme (SERPS)).
You may be entitled to additional State Pension if you're employed, looking after a child or caring for someone.
Find out if you are eligible for additional State Pension in 'Understanding the additional State Pension'.
Pension Credit - if you're on a low income in retirement
In certain circumstances, you may be able to get Pension Credit. Pension Credit is an income-related benefit made up of two components: Guarantee Credit and Savings Credit.
Guarantee Credit
Guarantee Credit works by topping up your weekly income. You may receive more if, for example, you are severely disabled, a carer or have housing costs such as a mortgage. To apply for Guarantee Credit - you must have reached the minimum Pension Credit qualifying age. For more information, see 'Understanding Pension Credit'.
Savings Credit
The age from which you can get the Savings Credit is 65. However, from March 2019 this will gradually increase in line with the increase in State Pension age. If you're currently aged 65 or over and living in Great Britain or Northern Ireland and have made some provision towards your retirement - for example,savings or a second pension - you may be entitled to Savings Credit. You may get the Savings Credit on its own or with the Guarantee Credit.
Find out if you're eligible for Pension Credit, canget a Pension Credit estimate and how to apply for Pension Credit. See the link 'Pension Credit - introduction'.
State Pension and Pension Credit rates
How much State Pension or Pension Credit you can get depends on your circumstances. To find out more about pension rates, see ‘State Pension and Pension Credit rate: how much can you get?’.
Personal pensions
Personal pensions are available from banks, building societies and life insurance companies, who invest your savings on your behalf.
You can save as much as you want into a personal pension. You will get tax relief on the amount you put in up to the annual allowance. Read 'Tax advantages of personal pensions' for further information on tax relief.
Find out if a personal pension would be suitable for you in 'Understanding personal pensions'.
Stakeholder pensions
Stakeholder pensions are a type of personal pension. They have to meet certain government standards which are designed to make sure they are good value.
Find out more about these standards and whether a stakeholder pension may be appropriate for you in 'Stakeholder pensions'.
Company pensions
Company pensions are set up by employers to provide pensions for their employees on retirement. They are also sometimes called occupational or workplace pensions.
Rules vary for different company pensions but money can be paid into the pension from:
- both your salary and your employer
- your salary only
- your employer only
You will get tax relief on the amount you put in up to the annual allowance.
Find out more about the different types of company pensions in 'Understanding company pensions'.
From 2012 there will be a new way of saving at work. In the new system your employer will automatically enrol you into a pension unless you are already in a suitable scheme. Enrolment will be easy and you will be able to opt out if you want.
Group personal pensions through your employer
Your employer may arrange for a pension provider to set up a personal pension through your workplace. A personal pension (including a stakeholder pension) arranged in this way is called a 'Group Personal Pension Plan'. Although they are sometimes referred to as company pensions, they are not run by employers.
Find out more about this type of pension in 'Personal pension plans through your employer'.
Pensions for the self-employed
If you're self-employed you make class 2 National Insurance contributions. These will entitle you to the basic State Pension, but not the additional State Pension.
If you want to receive more than the basic State Pension when you retire, you might want to consider starting a personal or stakeholder pension scheme. You'll then be able to make regular payments to build up savings for your retirement.
Benefits in retirement
As well as your State Pension, you may qualify for a number of other age related benefits.
See ‘Benefits in retirement’ to find out more about Pension Credit, Winter Fuel Payment, Cold Weather Payment, Veterans’ benefits.
To find out if you qualify for other concessions such as a free TV licence, see ‘Concessions and other help’.
- Guide to benefits in retirement
- Guide to concessions and other help (money, tax and benefits section)
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