Deciding on your options

There are three types of non-State pensions. Some are offered by employers and some you can start yourself. They are:

Options available when an occupational pension is not provided

Your employer is required to offer you the chance to join a pension scheme. If an occupational pension is not provided then this would normally be a stakeholder or alternative personal pension.

Much will depend upon your individual circumstances and objectives

Pension transfers can be complicated and you should always seek professional financial advice before going ahead. If you’re thinking about transferring your pension(s) into a new personal pension plan or Self-Invested Personal Pension (SIPP), remember; whether a transfer is suitable or not will very much depend upon your individual circumstances and objectives.

Joining your employer’s scheme

Occupational pension schemes vary from company to company. Your scheme is likely to be one of two general types, final-salary related or defined contribution scheme.

Putting off your claim for at least five weeks

By choosing to put off claiming your State Pension you can receive an extra State Pension. You must put off your claim for at least five weeks. For every five weeks you put off claiming you can earn an increase to your State Pension of one per cent. Extra State Pension is paid on top of your normal weekly State Pension. It continues for as long as you are getting State Pension. Extra State Pension is increased each April in line with increases to your State Pension.

A gradual increase over two years every decade

State Pension age is the earliest age at which you can claim your State Pension. It is currently 65 for men and 60 for women. However, the State Pension age is changing and will increase between 2010 and 2046.

Important changes on the horizon

The additional State Pension, or State Second Pension, is paid in addition to the basic State Pension. Your entitlement to the additional State Pension (whether from SERPS – State Earnings-Related Pension Scheme, or from the State Second Pension) is calculated when you claim the basic State Pension.

Building up enough ‘qualifying years’

The basic State Pension is a government-administered pension. It is based on the number of qualifying years gained through National Insurance Contributions (NICs) you’ve paid, are treated as having paid or have been credited with throughout your working life.

What opportunities could the future hold?

Looking ahead to this new decade, what areas could be seen as opportunities for investors?

Don’t leave your loved ones with additional costs and complications

People who die without a valid will, or intestate, leave costs and complications to their loved ones and often gift thousands of pounds to the State in what may be avoidable Inheritance Tax (IHT).

Transferring pensions

There are a number of different reasons why you may wish to consider transferring your pension schemes, whether this is the result of a change of employment, poor investment performance, high charges and issues over the security of the pension scheme, or a need to improve flexibility.

Taking control of your pension planning

A Self-Invested Personal Pension Scheme (SIPP) provides you with the option of choosing when, where and how you invest the assets of your pension fund. Any contributions that you make to a SIPP will receive tax relief of between 20 per cent and 40 per cent depending on what the current tax rates are and what personal tax band you are in.

Taking an income each year from your retirement saving

Unsecured Pension Plan (formerly Income Drawdown) is the name given to the facility to continue to keep your retirement savings invested and take an income each year rather than buying an annuity. This facility can only be continued to age 75, at which time an annuity has to be bought or the money transferred into an Alternatively Secured Pension.

Encouraging you to save towards your retirement

Pensions are long-term investments designed to help ensure that you have enough income in retirement. The government encourages you to save towards your retirement by offering ‘tax relief’ on your contributions.

The biggest change in pension legislation in a lifetime

The introduction of Pension Simplification legislation on 6 April 2006 (A-Day) brought about the biggest change in pension legislation in a lifetime with the following aims: