Pensions Explained. A pension provides income to live on in retirement.

There are state benefit schemes offering limited financial support for your old age, and a number of other private schemes enabling you to build a larger fund for the future. To avoid a paltry income in retirement it is in everybodys best interest to save more for it. State benefits are included in the State 2nd Pension, replacing the basic state pension (SERPS) from 2002. There are a number of other types of pension scheme including occupational pensions, personal pensions and stakeholder pensions. Where the pension is an occupational scheme. it may be possible to make additional contributions in the form of AVCs, FSAVCs or stakeholder pension contributions. Self invested personal pension schemes (SIPPs) allow investments from a wide range of
sources including Commercial Property, shares and unit trusts.

Types of UK Pensions.

Brief explanations of the different types of UK pensions are given below, please follow the links for more information. Basic state pension. Although an entitlement for most people, the amount received from the basic state pension will depend on the amount of national insurance contributions paid. more >> State Second Pension. On 6 April 2002, the State Second Pension (S2P), introduced by the Child Support, Pensions and Social Security Act 2000 replaced the State Earnings Related Pension Scheme (SERPS). more >> Personal and Stakeholder pensions. Personal pensions, introduced on 1 July 1988, originally aimed to give people who were not part of a company pension scheme their own portable pension, designed on a money purchase basis although since April 2001 certain individuals who are members of company pension schemes can also take out personal pensions. more >> Occupational pension schemes. Employers can set up occupational pension schemes for their employees.Public sector schemes typically offer pension accrual of 1/80th of final remuneration for each year of service up to a maximum of 40 years plus a tax free lump sum of up to 1.5 x final remuneration. Private sector schemes can be either final salary schemes known as defined benefit schemes or money purchase schemes known as defined contribution schemes. more >>

Additional Voluntary Contributions (AVCs). It is now compulsory for companies to offer employees the opportunity to invest additional contributions into their occupational scheme where there is one, in order to boost retirement benefits. more >> Free Standing Additional Voluntary Contributions (FSAVCs). Free standing additional voluntary contribution schemes (FSAVCs) were introduced in 1987. more >> Self Invested Personal Pension Schemes (SIPPS). From April 6th 2006 Government proposals for pension simplification came into effect. This has lead to many new opportunities for people to invest their savings for the long term with greater flexibility when it comes to retirement and ways of generating an income. more >> State Earnings Related Pension Scheme (SERPS). The State Second Pension (S2P) replaced SERPS with effect from 6 April 2002. more >> personal pensions explained >> occupational pensions explained >> SIPPs explained >> SIPPs investments >> home

The information contained within this website is subject to the UK regulatory regime and is therefore restricted to consumers based in the UK and UK expatriates. Please read our DisclaimerState and other types of Pension Schemes Before you decide whether a pension is right for you it's important to know about the different types of pensions available. In the UK pensions can broadly be split into three categories:

State Pensions - offered by the Government Company or Occupational Pensions - offered by Employers to their staff Personal Pensions - offered by Insurance companies, Finance companies, Banks, Building Societies etc.

The following pages outline these in more detail: State Pensions Basic State Pension Description Depends on the number of qualifying years you make National Insurance contributions for. Changes to the Basic State Pension made on 6 April 2010 mean

men born on or after 5 April 1945 and women born on or after 5 April 1950 now only need to have:

30 qualifying years to get a full basic state pension 1 qualifying year to get some basic state pension

Parents and carers can also obtain National Insurance credits to build up their qualifying years. Additional or State Second Pension (S2P) You can qualify for an additional state pension if you are under state retirement age and are:

employed and earning over 4,940 (from any one job) looking after children under 12 years old and claiming child benefit caring for a sick or disabled person for more than 20 hours a week and claiming carer's credit a registered foster carer and claiming carer's credit receiving certain other benefits due to illness or disability

Employed people do not usually build up additional State Pension if they are in a personal or occupational pension scheme that 'contracts out' of the Additional State Pension. Until April 2002, the Additional State Pension for employees was called the State Earnings-Related Pension Scheme (SERPS). Over 80 Pension Unlike other State Pensions, this is not based on National Insurance contributions. You can qualify if you:

are aged 80 or over don't get basic State Pension, or your basic State Pension is less than 58.50 a week live in England, Scotland or Wales, and have done so for 10 years or more.

National Insurance Contributions and your earnings (if you haven't contracted out of the Additional State pension) determine what you get under a state pension. Contributions you make while working go straight towards paying for pensions being claimed now, so when you retire your pension will be paid for by the current generation of workers. For full details of State Pensions, including enquiries about your own state pension entitlements, refer to the UK Government website: www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension

Download the UK Pension PDF Guide here - see our other free PDF guides here

Beginners' guide to pensions

Thinking of taking early retirement?

Find out what effect early retirement might have on your pensions and what steps you can take to protect your pension income

The effect of early retirement on your pension

Types of pensions
Learn about the different types of pension schemes available - from the State Pension to private and company pensions

Saving for retirement

There are many ways to build up money for you retirement, including savings accounts, ISAs and investments

Forecasting your pension

Get an estimate of what you can expect to receive on retirement

Tax relief on pension contributions

How tax relief on pension contributions works and how it's paid

Choosing and using a pensions adviser

Your options and rights, and the different types of pensions adviser

Getting information and help with pensions

Where to find free and impartial information on personal, company and State Pensions

Increasing your income when you get to pension age

Find out ways to increase your income after you reach State Pension age

Working past State Pension age - your options

Reaching State Pension age doesn't mean you have to give up work, you can keep earning and enjoy other benefits too