Starting a pension
There are two main ways of starting a pension: getting one through your job, or setting up your own. You dont necessarily need to have one type or the other you can have both. And changes are coming that mean many more people will get a chance to join a pension at work.
Setting up your own pension independently
You can set up a pension scheme at any time whether you are employed, self-employed or not working. This type of pension is called a personal pension. They are available from banks, building societies and life insurance companies. Once you have set one up you can control how much money you pay into it.
You can save as much as you like into a personal pension. It won't affect your entitlement to the basic State Pension but it may reduce the amount of additional State Pension you build up. You'll be able to get tax relief on the amount you put in, up to an annual allowance. So, for each pound you put into your pension, the government tops it up using money it would otherwise have taken from you as tax.
Stakeholder Pensions are a special type of personal pension. They have to meet certain government standards to make sure they are good value. They are open to everyone and may be worth looking into if you are self-employed or if your employer doesn't offer a company pension.
You don't have to be working to contribute to a stakeholder pension. You can contribute as little as 20 at a time and you dont have to contribute every month if you cant afford it.
- Setting up a personal pension
- Stakeholder pensions
- The effects of personal pensions on additional State Pension
Getting a pension through your job
Many employers have a company or workplace pension, a scheme they have set up for their employees to join. Most workplace pensions work like this:
- you decide to put part of your salary into your own pension pot
- your employer may make a contribution as well this might mean they match your contribution, or put in a different amount
- you may not need to put anything in yourself to get the employer contribution
These types of workplace pensions are often called Defined Contribution or Money Purchase schemes. They include Stakeholder Pensions and Group Personal Pensions (a personal pension you get through your employer).
Other company pensions work differently. The pension you get at the end is based on your salary and how many years you have worked for your employer. These are usually called Final Salary or Defined Benefit schemes and are most likely to be offered by large companies or public sector organisations.
If your employer offers a company pension, they will be able to tell you which kind of scheme they offer.
Automatic enrolment into pensions at work from 2012
Starting in 2012, there will be a new way of saving at work. Most people who are employed and earning more than 5,035 a year will be eligible. In the new system, you will automatically be enrolled into a pension by your employer unless you are already in a suitable scheme. On top of any contributions made by you, your employer will pay in, and the Government will contribute through tax relief. You will be able to opt out if you want.
- Automatic enrolment into pensions at work
- Understanding company pensions
- Getting a personal pension through your employer
If you think you have a pension but cant remember
Its easy to find out if you have lost track of what pensions you have. If you think you may have an old company or personal pension but cant remember the details you can contact the Pension Tracing Service on 0845 6002 537.
- The Pension Tracing Service
More useful links
- Where to get information and help with pensions
- Benefits of a company or personal pension
- Risks of a company or personal pension
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