Pensions

Neurocafé 18th May 2022 by Linda S


See the slides in LEGS Members' Area for details.


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Planning for the future

Richard from Hammersmith and Fulham Citizens Advice informed us about pensions, something we should all have an interest in! Pensions are complicated. Detail is important. You may need to get some specialist advice.

Overview

A pension is an income for later life when you have stopped paid employment. Richard described the main types of pension (State, Personal, Workplace) how they work, what to think about and where to get more information. What you will receive depends on how it is funded and what age you access it.

Pensions have two phases:

- Accumulation (build it up)

- Decumulation (it pays out)

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Finances

State Pension

Visit the government website and set up a gateway ID to check what you will get. Amounts can be subject to change. You need 30 or 35 years of contributions/credits and you can check your contribution record. You can pay voluntary contributions.

  • Find out estimated pension age & when it will be paid

  • Depends on number of years of NI contributions/credits

£185.15 a week is the max state pension. £9,627 a year

If you delay taking your pension then you may get more.

The amount increases every April but this can change.

Accumulation

  • Build up a pot

  • Select provider

  • Government tops it up £20 for every £80

  • Watch out for level of charges

No tax is taken from 'pot' while it builds up. The size of final 'pot' depends on investment performance, also by amount of money you paid in

Decumulation


You normally have to wait until age 55 to be able to withdraw from your pension.


Choices:

- Buy annuity

- Get adjustable Income

- Money in chunks

- Money in one go

You can take up to 25% of pot tax free (income tax payable on the rest)


Work place pensions


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Work place pensions

There are two types of workplace pension:

  • Defined contribution (DC) which is a money purchase scheme

  • Defined benefit (DB) based on final salary

This is now less common in the private sector.

There is auto enrolment to force employers to pay into pension schemes. You can opt out but it is 'free money' from your employer!

DC workplace pensions

The main difference is your employer contributes to your pension pot = free money

DB workplace pensions

Mainly now found only in public sector. Limited choice for taking pension

You can transfer DB pension to personal pension - not normally a good idea

There is a spouse or spouse equivalent if you die first, usually 50%.

Can be transferred to a personal pension but not normally a good idea

Pension Credit

A means-tested benefit (not a pension) which is similar to Universal Credit.

£182.60 a week single

£278.70 a week couple

Pension Credit tops up income to this minimum level. Ask for help if you need it.

Pension Credit is easy to claim and can be a gateway to other benefits

- Health/welfare, NHS dental care

- Utility bills

Final thoughts and where to find advice


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Where to get advice?

  • Watch out for scams. For example, do not respond to a 'Free pension review' or 'Help releasing your pension'.

Free and impartial advice is available:


  • Citizens Advice can help with pensions advice, also offer help with digital skills.



  • Pension Wise run by 'Money helper' run by the government offer free sessions.


  • If you have complaints or questions about what has been offered to you, contact the Pensions Ombudsman



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