Your basic state pension allowance is built up over the time that you are paying national insurance contributions from your salary. If you have spent time during your working life receiving benefits, off sick, or caring for someone, then the government may also have given you credits in lieu of national insurance payments that will go towards your basic pension.
If you have a sufficient number of qualifying years (years where you have paid, or been treated as having paid national insurance contributions) then you will qualify for the state pension.
The maximum basic state pension for an individual is £97.65 per week. A person who is or has been married or in a civil partnership may also be able to draw a state pension on the basis of their partner’s national insurance contributions, even if they don’t qualify themselves.
This can be for up to 60% of the full basic state pension, so £58.50. As such, a married couple or civil partnership where one partner has predominantly been in employment could claim up to £156.15 per week. Where both of the couple have worked and built up national insurance contributions, the couple could draw a maximum of £195.30 per week in basic state pension.
You may also be able to build up your pension allowance with credits while you are, for instance, looking after a child under 12, acting as a registered foster parent, or caring 20 hours or more for a severely disabled person. It is also possible to receive extra credits through having savings.
Currently, the age when you can begin to draw your state pension is 65 for men, and for 60 for women. However, as of 6th April 2010, the age for women will gradually rise to 65. In the future, the age for both men and women will rise again, to reflect increased life expectancy and better general standards of health.
However, you may feel that you can do better than the basic state pension, or indeed, that you need to in order to pursue the kind of lifestyle during your retirement that you would like to.
In that case, there are options open to you, and we can help weigh these up for you, and advise on your best strategy.
Employers are required to offer some kind of pension scheme to any full-time employee, providing that the company contains more than five people.
Company pension schemes will usually be either a) ‘salary related’, where your pension is directly related to your salary, and how long you have been on the scheme for, or b) ‘money purchase’, where the amount of money that you pay into the scheme over time, and how well its investment by the company has gone determines the size of your ‘fund’, which is then usually used to purchase an annuity.
You can also take out a personal pension, which generally means entering a scheme with a financial company whereby you pay them either a lump sum or a monthly amount, and they invest it on your behalf, and provide you with a pension income.
This can often be a rewarding strategy for boosting your retirement income on top of your state pension allowance.
