People often put off thinking about pensions. There are lots of reasons for this – when you’re young it seems a long way off, financial strains, a lack of understanding, etc – but it is really important to be prepared for retirement and ensure you will have enough to live on.
Since 2006, Community’s Pension Education Project has been working to increase the awareness of the personal financial needs of those deemed to be at significant risk of being underprovided for in their pension provision – the self employed, women, over 50s, young people and ethnic minorities – to help them make informed decisions to plan for a secure retirement.
- 24 pension presentations delivered in workplaces, conferences and community organisations throughout the UK.
- Presentations have been supported with literature tailored to appropriate languages and skill levels, with access to interactive materials.
- Information has been translated into Polish and Braille.
- Over 1000 beneficiaries have received pension information which has given them better understanding of the need to plan for retirement.
- Many Communitas staff have been trained in pension awareness and presentation skills.
The project is designed to offer information sharing and awareness related to different target audiences, information which will assist them in thinking about their own circumstances and reviewing their current provision. We see this as our responsibility to our members and, their community and the industries they represent.
What is a pension?
A pension is the money you will have to live on when you retire, which comes from the state and savings you have built up during your working life. National Insurance payments contribute towards a state pension, but this may not be enough to give you the standard of living you would like. Other pension schemes involve paying an amount of money each month which is then invested for you by financial experts to give you a regular income and/or lump sum once you reach retirement.
When do I need to start thinking about my pension?
Straight away! Whatever age you are, don’t put it off – doing something about your pension now can make a real difference to how much you get when you retire. The earlier you start, the more time you will have to save. The longer you leave it, the more you will have to pay into your pension fund each month to get the level of pension you need.
What types of pension are there?
There are three main types of pension:
The state pension, including the second state pension and pension credit.
- You will get a basic state pension if you have paid enough National Insurance (NI) contributions.
- State pensions are paid out by the state when people reach official retirement age. By 2020 the retirement age for both men and women will be 65.
- How much state pension you get depends on how many NI contributions you have paid. Women who have stopped working to raise children or anyone who has spent time working abroad may find that their NI contributions are not enough to get the full state pension.
- The state second pension is an extra flat-rate pension for lower-paid people. People can choose to stop paying into the second state pension at any time during their working lives. Part of their NI contributions will then go into a pension scheme of their own instead – an occupational or private pension. This is called ‘contracting out’.
Occupational pensions (final salary scheme or money purchase)
- Occupational pensions are arranged by employers.
- In a final salary scheme your employer agrees to give you a proportion of your final salary for each year you have worked.
- This is the only non-state pension that doesn’t depend on how well investments do. There is no real risk for the employee, as long as the company continues to exist.
- With a money purchase scheme, you and your employer both pay into the scheme and you get your ‘pot’ of money invested when you retire.
Private Pension (stakeholder or personal pensions)
You can set up a private pension yourself, or your employer can set one up as part of a group scheme. There are two types:
- Stakeholder pensions cost less to set up and you can pay into them as and when you want.
- Personal pensions may cost more in charges and you have to may into them regularly. Employers often contribute to employees’ personal pensions if there is no occupational scheme.
Where can I find out more?
The Pensions Advisory Service gives information and advice about occupational, stakeholder and personal pensions.
Tel: 0845 6012 923
Email: enquiries@pensionadvisoryservice.org.uk
Website: http://www.opas.org.uk/
The Pension Service can give you help with forecasting your state pension, so that you know how much you can expect to get from the state when you retire.
Tel: 0845 6060 265 (General enquiries)
0845 3000 168 (Pension forecasts)
Website: http://www.pensions.gov.uk/
The Financial Services Authority aims to help people get a fair deal. There is a useful section about pensions on its website and provides tables that will help you shop around and compare the features and costs of financial products.
Tel: 0845 606 1234
Email: consumerhelp@fsa.gov.uk
Website: http://www.fsa.gov.uk/
In addition, your bank or building society will have a special pensions advisor to talk to and offer help.
For more information regarding Community’s Pension Education Project contact: jessicahood@communitas.eu.com