Pensions basics.

WHAT IS A PENSION?

In its simplest form, a pension is a tax-efficient way to save for your retirement. When the time comes for you to stop working, you don’t want to worry about your finances. A pension can be a big step towards a more comfortable future by giving you a regular income.

The money in your pension pot is invested in funds with the aim of growing the value of your pension. The sum you end up with when you come to retire is used to buy an annuity (to provide you with an income for the rest of your life) or you can possibly take benefits directly from your pension plan with income drawdown.

IS THE BASIC STATE PENSION ENOUGH FOR YOU?

Like the name suggests, the basic State pension is unlikely to give you enough income to fulfil your needs at retirement.  In the current tax year (2012/2013), the most you'd get per week is just £107.45 (or £171.85 if you’re married).

You might be able to get more with the State Second Pension, which is a top up to the Basic State Pension, but this will depend on your personal circumstances, such as if you’re earning over £5,304, caring for a sick or disabled person, or receiving certain other benefits due to illness and disability. You could also be eligible for the Pension Credit if you have a relatively low income.

Find out more about State pensions and see how much you’d be likely to receive from the State when you retire with a State Pension Forecast.

By joining your employer’s pension scheme your income at retirement could be significantly more than if you just rely on the State.

Read more about the benefits of being part of your company’s pension scheme.