Often the company where you work will provide you a
pension scheme. But if it’s
a small company you will probably need to subscribe
to private pension scheme. It may also provide financial
benefits should you have to retire as a result of ill
health, and for your family if you unfortunately die
before you retire.
Pension in UK is based on capital investment. The company
will give you the choice to invest in several more or
less risky plans (often: equities, bonds, monetary instruments).
A percentage of your salary will be invested (e.g. you
give 5% and the company gives 2 or 3%, or in the best
cases, you pay 2% of Pensionable Salary and the company
will pay 4%). You may vary the level of your voluntary
contributions on a monthly basis.
Although Normal Retirement Age is
age 65, you can retire at any age from 50 onwards.
Your benefits will be based on the value of your account
at the time you retire.
When you retire, the value of your account will be
used to buy benefits for you. The level of benefits
provided will depend upon:
- the value of your account
at retirement
- the cost of buying benefits, which will vary with
investment conditions and your age at retirement; and
- the type of benefits you decide to buy – for instance,
with Spouse’s pension or with pension increases in line
with inflation (in addition to a pension for yourself,
you will often be able to choose one ore more of the
following options: a tax-free cash lump sum in lieu
of a part of your total benefit;
- a higher level of annual pension increases, subject
to a minimum of LPI, as required by law;
- a pension for your Spouse or another Dependant in
the event of your death.
State pensions are made of two parts:
- the basic state pension (provided if you have an
adequate National Insurance contribution record); and
- an earnings-related pension paid under the State Earnings-Related
Pension Scheme (SERPS – based on your earnings, it provides
you with a pension of 20% of your average earnings);
or
- a private company pension scheme.
You will find more information by contacting Inland
Revenue (http://www.inlandrevenue.gov.uk/).
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