Pensions Overview

When we think about pensions we tend to think of the State Pension. But, of course, this would provide (assuming you've made sufficient contributions) a bare minimum of income for your retirement. Having a decent pension in retirement to allow to live comfortably with sufficient income to provide for your needs after you have retired from work.

Pensions can seem complicated and it is correct that advice should be sought, but, before doing that a basic knowledge would help you in your ultimate decision.

Here is an overview of the common types of pension:

The Basic State Pension - for people who have paid sufficient National Insurance contributions while at work or have been credited with enough contributions if not working.

State Second Pension (S2P) - Before 6 April 2002, it was known as SERPS (State Earnings Related Pension Scheme). From 6 April 2002, SERPS was reformed to provide a more generous additional State Pension for low and moderate earners, carers and people with a long term illness or disability. The reformed additional State Pension is known as the State Second Pension. State Second Pension is based upon earnings on which standard rate Class 1 National Insurance contributions are paid or treated as as having been paid. Additional State Pension is not available in respect of self employed income.

Occupational Pension Scheme (a pension through an employer's scheme) - if your employer operates a pensions scheme, it's usually a good idea to find out about the benefits of the scheme. There may be contributions from your employer

Personal Pensions - open to nearly everyone and especially useful if you are self-employed or your employer doesn't run a company scheme. State Pensions may not produce the same level of income that you will have been accustomed to whilst working.

It's important to think early about how to build up your income in retirement. The earlier you take action to provide this income the easier it will be for you to fund it.