The state pension is a regular payment from the department of work and pensions (DWP), that individuals can claim when they reach state pension age. When the State pension payment begins it is a secure income for life. Most individuals are entitled to some state pension, however how much State pension you receive depends upon your National Insurance contributions.
You can find out by clicking on this link,
www.gov.uk/check-state-pension which will direct you to the government online portal.
It is important to know that the state pension age is currently under review and could change.
To find out when you are likely to receive your state pension at this moment in time, follow this link
www.gov.uk/state-pension-age which will take you to the government portal.
Defined benefit pensions (also known as ‘final salary’ or ‘career average’ pension schemes), are workplace pensions which were set up by your employer. The amount you receive depends on a number different factors, from how long you worked at the company to the amount that you earnt.
Most Defined Benefit schemes have a set retirement age, however you might be able to take your pension earlier or later depending on the scheme rules. When you are entitled to receive your Defined Benefit pension, you will have options of how you draw the pension. Options could include taking a tax free lump sum with a reduced annual income or income at a higher rate with no tax free lump sum.
A defined contribution pension is a pension fund that develops over time as you or your employer make contributions to it, with the sole aim of the fund being able to produce you with an income in retirement.
There are many forms of Defined Contributions schemes from Personal Pensions, SIPPs to Auto-enrolment plan’s which can be known as workplace pensions.
Defined contribution pensions can be made up by regular contributions, lump sums or a mixture of both. Contributions are normally entitled to receive tax relief based on your marginal rate of tax, which adds to the value contributed. As an example, if you were a basic rate tax-payer & contributed £100 into a personal pension, the pension fund will receive tax relief at 20%, meaning the total amount invest is £125.
Funds that make up your pension are usually invested to further assist the growth of the fund. By conducting regular reviews, we can track and monitor the progress of your pension fund over time to ensure it meets your desired income needs for retirement.
Since pension freedoms were introduced in 2015, you can flexibly access your pension from age 55.
The most you can pay into your pension each tax year is as much as you earn, up to the annual pension allowance which is currently £60,000. However, you can only pay up to the amount you earn.
As an example, if you earn £30,000, the maximum you can pay in is £30,000. If you earn £100,000, then the maximum you can pay in is £60,000.
It is important to note, from 6th April 2028, the age from which we can access our pension benefits will increase from 55 to 57.
Investors should remember that the value of a pension and the income received from an investment can go down as well as up, and they may not get back the amount they invested.
If you wanted to make the most of your pension savings and tax allowances, carry forward lets you take advantage of any unused pension allowance from the previous three tax years once you have maximised the current tax year. This means you may be able to make a pension contribution of up to £180,000 including tax relief.
Tax rules can change and any benefits will depend on your circumstances. Scottish tax rates and bands differ.
There are two main requirements when considering carry forward:
- You had a pension in each year you wish to carry forward from, whether or not you made a contribution (the State Pension doesn’t count).
- You have earnings of at least the total amount you are contributing this tax year. Alternatively, your employer could contribute to your pension.
There are other factors to consider if you or your employer have contributed to other pensions in addition to your SIPP or you have been a member of a final salary scheme.
Here’s an example to show you how it works. It’s important to remember you typically need to be at least 55 (57 from 2028) before you can access money in your pension funds.
