Research published early this month by the Chartered Institute for Securities and Investments revealed that 10% of 18 to 24 year old’s who had a job did not know what a pension was or how one worked.
What about you, do you know enough about pensions?
Getting a pension is something people push to the back of their minds, retirement age can seem far away and you are enjoying starting your working life. Before you can make any decisions on what is right for you you’ll need to explore some facts. This article gives an overview to pensions, you should explore your entitlement on GOV.UK and with your employer.
What is a Pension?
A pension is a long term savings plan, you pay in a sum of money each month from your wages that you can use when you retire from work. Whilst it seems like a long way off, the earlier you start the more money you should have when the time comes to enjoy not working anymore!
The Government pay everyone of State Retirement Age a secure fixed income, the state retirement age is under review (at the time we wrote this article it was 68 years old for men and women). The amount of money you will have at this stage will depend on a number of factors including the amount of years you have made National Insurance contributions.
Are there different types of pensions?
Workplace Pensions
A workplace pension is a way of saving for your retirement that’s arranged by your employer. Some workplace pensions are called ‘occupational’, ‘works’, ‘company’ or ‘work-based’ pensions.
A percentage of your pay is put into the pension scheme automatically every payday. In most cases, your employer also adds money into the pension scheme for you.
Personal pensions
There are different types of personal pensions which you can explore here. Personal pensions are pensions that you arrange yourself. They’re sometimes known as defined contribution or ‘money purchase’ pensions. You’ll usually get a pension that’s based on how much was paid in.
The money you pay into a personal pension is put into investments (such as shares) by the pension provider.
State Pension
The Government have a certain amount of money they pay as a state pension when people reach state retirement age. The amount and eligibility can differ, find out more here.
Do I need to have one?
We do have a state pension foundation but saving into a pension means you could have more money to continue doing the things you enjoy during retirement. With all money decisions you should be seeking advice, you can use the GOV.UK guides, talk to Citizens Advice or get advice from a qualified financial advisor.
Do I qualify?
You are able to pay into a workplace pension from the age of 18 however you can opt out until you are 22. The government has provided employers with a simple criteria to ensure that those meeting the below are enrolled;
- Are aged between 22 and the State Pension age
- Earn at least £10,000 a year
- Normally works in the UK (Including people based in the UK but travel abroad for work)
What do I need to do?
For a Workplace Pension, your employer will automatically enroll you. The payment will come off your wage each month and will be a percentage of your income. It’s great because not only does your employer enrol you but they also pay into your pension pot too!
By 2018, all employers were required to enrol their eligible workers into a workplace pension scheme if they are not already in one. If you fit the above criteria but do not have a pension raise it with your manager.
You can explore the criteria for personal pensions but we would encourage you to have conversations with the qualified financial advisors when you are ready.
Next Steps:
- You can find out more information on the GOV.UK Website
