Increasing your income in retirement :Cross Stitch – Pensions and retirement planning
When you retire you’ll need to make sure you have enough income to provide for your needs. You should look at what personal or company pensions are available. You can also increase your State Pension by putting off claiming it or by topping it up.
You can get a basic State Pension by having enough ‘qualifying years’ of National Insurance contributions over your working life. Find out more about how this works.
There are two ways to find out how much State Pension you may get. You can:
- use the online State Pension profiler to get a quick estimate of your basic State Pension to date
- ask for an estimate of the State Pension you may get, including any additional State Pension and Graduated Retirement Benefit, based on your National Insurance contributions record
If you work past your State Pension age then you can choose to put off claiming (defer) your State Pension. You could earn extra State Pension later on, or get a lump sum payment. Find out more about the possible benefits of deferring your State Pension.
If you reached State Pension age before 6 April 2010, you may have been entitled to Home Responsibilities Protection. This meant that the number of qualifying years you needed for a full basic State Pension may have been reduced if you were both:
- not working or your wages were low and you did not pay National Insurance contributions
- caring for a child under 16 or a sick or disabled person
This protection applied to any complete tax year from April 1978 to April 2010.
From 6 April 2010, a new National Insurance credit for parents and carers replaced Home Responsibilities Protection. This allows people reaching State Pension age on or after 6 April 2023 to build up qualifying years through new weekly National Insurance credits for:
- basic State Pension
- additional State Pension
Periods of Home Responsibilities Protection awarded for periods before April 2010 have been converted to years of credits.
Another way to make additional provision for your retirement is to take out a personal pension or a stakeholder pension. A stakeholder pension is a type of personal pension that must meet minimum government standards. For instance, you’re allowed to make flexible payments and annual management charges are capped.
The advantage of a personal or stakeholder pension is the government will pay tax relief on the contributions you make to your pension fund. This means that for every £80 paid into your fund, the government will pay a further £20.
If you work for an employer, check to see if they run a company pension scheme and if you are able to join it.
Make sure it’s in your best interests to join the scheme. Ask the scheme administrators to explain the benefits the scheme provides and how much of your salary you will have to contribute.
If you change employment you’ll probably not be able to continue to pay into the scheme. You will still be entitled to any company pensions that you have already built up when you retire. Or you can transfer it to another pension scheme.
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.