How much income will you have in retirement?

As you approach retirement you'll need to look at a range of sources to estimate how much income you'll have. These include the State Pension, personal or company (occupational) pension schemes, state benefits you may qualify for on retirement and your savings or investments.

State Pension

If you're entitled to the basic State Pension you can claim it from State Pension age – even if you carry on working.

The government has announced new proposals for increasing State Pension age. From December 2018 the State Pension age for both men and women will start to increase to reach 66 by April 2020. This will mean women’s State Pension age will increase more quickly to 65 between April 2016 and November 2018. Any change to the timetable would need the approval of Parliament.

The government is also considering the timetable for future increases to the State Pension age from 66 to 68.

The full basic State Pension is £107.45 per week in 2012-2013.

You may also be entitled to the additional State Pension (also called the 'State Second Pension' and previously called the State Earnings-Related Pension Scheme, or SERPS).

Understanding the additional State Pension

State Pension forecast

A State Pension forecast gives you an estimate of how much State Pension you may receive at State Pension age based on your National Insurance contributions to date and assumptions made around any future contributions you may make before you reach State Pension age.

Getting a State Pension forecast

Putting off your State Pension claim

Bear in mind that you don't have to claim your State Pension as soon as you reach State Pension age, whether or not you carry on working. If you put off claiming you can choose to receive a higher weekly amount or a lump-sum payment plus your normal State Pension.

State Pension deferral - taking up your State Pension later

Annual benefit statements for your personal or company pensions

The trustees or managers of personal and some company pension schemes must send you a statement each year about your pension.

If you have a defined benefit (salary-related) company pension you can request an annual statement but some companies will send them automatically. If you have a defined contribution (non salary-related) company 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 company pension

The amount you'll get from your personal pension and any non salary related ('money purchase') company 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 company pension

The amount you'll get from a salary related company 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.

Forecasting your pension

Tracing a personal or company pension

The Pension Tracing Service is a free service that may be able to help you find an old company or personal pension scheme that you’ve lost touch with.

You can call the Pension Tracing Service on 0845 6002 537 (+44 191 218 2466 from outside the UK), or textphone 0845 3000 169. Lines are open Monday to Friday 8.00 am to 6.00 pm. You can also complete a tracing form on The Pension Service website.

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 are income related, some are not.

Pension Credit

Pension Credit is an income-related benefit for those living in the UK who have reached the minimum qualifying age. It guarantees a minimum weekly income (2012-2013) of:

£142.70 if you are single
£217.90 if you have a partner

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 the age when you may be able to apply for Pension Credit, you should use the State Pension age calculator.

The State Pension age for both men and women will rise in the future. The government is reviewing the current timetable for increasing the State Pension age from 65 to 66. No decision has yet been made as to how the timetable will change. Any change will require the approval of Parliament.

Changes to the State Pension age are likely to affect the Pension Credit qualifying age.

State Pension age calculator on the Directgov website

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.

Benefits and tax allowances in retirement

Income from other sources

Long-term savings and investments you have can provide extra income in retirement, but when taking these into account bear in mind that:

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

Bear in mind that 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 also taxable. However, your personal allowance increases and you don't pay National Insurance contributions after you reach State Pension age, even if you carry on working.