All about pensions

With so many different options to consider, pensions can be a complicated subject.

With so many different options to consider, pensions can be a complicated subject.

Many of us may dismiss talking about pensions because we don’t feel it’s something we need to give much thought to until we’re ‘older.’

In reality, you’re never too young to start thinking about your pension. After all, your pension has the power to influence aspects of your later years, such as when you might be able to take retirement.

We thought we’d start by sharing four interesting points about pensions and retirement:

  1. In the UK, the first ever pension was introduced in January 1909. Those aged 70 and over were entitled to between 10p and 25p per week, but only if they were deemed to be ‘of good character!’
  2. In response to a campaign by unmarried women in the 1930s, the State Pension age for women was lowered to 60 in 1940. The State Pension age for men was 65. This remained the case up until 2010.
  3. In 2023, the average retirement age in the UK was 64 years for women, and 65.3 for men.
  4. In 2021, it was reported that then 10-year-old Pixie Curtis may become one of the youngest people in the world to retire. Pixie and her mother own Pixie’s Fidgets – a toy company that generated over $200,000 in its first month.

Deciding on the right pension path for you requires thorough research.

In this article, we’re going to be looking at three different types of pension:

  • State pension;
  • Workplace pension; and
  • Private pension

State Pension

The government State Pension is available to most UK residents when they reach a certain age.

You do not need to have retired to claim your State Pension, and can continue working if you choose to do so. Your State Pension will not be affected by your income, although you may be required to pay income tax.

Who is eligible to receive a State Pension?

To claim State Pension in the UK, you must have done at least one of the following for a minimum of 10 years (these do not need to be consecutive years):

  • Worked and paid contributions towards National Insurance;
  • Paid voluntary National Insurance contributions; or
  • Received National Insurance credits while undergoing a period of illness or unemployment.

It may also be possible to claim State Pension if you have ever paid married women’s or widow’s contributionsat a reduced rate, or lived outside of the UK.

When can I claim my State Pension?

Men and women born before April 5,1960, are able to claim their State Pension from the age of 66.  From May 6, 2026, anyone born after this date will need to reach the age of 67 before they’re able to claim. This will eventually rise to 68 between 2044 and 2046.

It’s worth pointing out that there are currently two different types of State Pension in the UK: basic and new. All those who qualified for the basic package have now reached State Pension age. Anyone due to reach State Pension age either on or after April 6, 2016, will be entitled to the new package.

All information provided in this article refers to the new State Pension.

How much money can I get in my State Pension?

This will depend on your National Insurance record.

The full state pension amount is currently £203.85 per week. There is a possibility that you may be entitled to more money if you delay your claim. Your State Pension will increase each week that you defer, as long as you defer for five weeks or more. For every five weeks that it is deferred, your State Pension will increase by the equivalent of 1%.

The website includes a handy State Pension forecast tool that will reveal how much you could receive and when you may be able to claim. To use this service, you will need your Government Gateway details. If you do not have a Government Gateway account, you can easily sign up here.

How can I claim my State Pension?

You should receive a letter within three months of you reaching State Pension age. The letter will contain an invitation code which will enable you to claim.

You will also need to provide the following:

  • The date of your most recent marriage, civil partnership, or divorce;
  • Your bank or building society details; and
  • The dates of any time spent living or working abroad, if applicable.

In the event that you have lost or not received your invitation code, you can request a new one here.

You will receive another letter once your claim has been submitted, which will detail your payment plan going forwards. State Pension payments are usually made every four weeks.

Workplace Pension

All UK employees must be offered a Workplace Pension by their employers.

Your employer is not allowed to influence your decision to opt in or out, or discriminate against whichever option you choose.

It’s also important to add that your employer cannot refuse to enrol you.

Who is eligible for a Workplace Pension?

Your employer should automatically enrol you into a Workplace Pension if you:

  • Are classed as a worker;
  • Usually carry out your job in the UK;
  • Earn over £10,000 a year; and
  • Are aged between 22 and State Pension age.

There may be some alternative restrictions regarding eligibility, which you can read about here.

If you earn less than £520 a month, less than £480 over four weeks, or less than £120 a week, your employer does not have to contribute to your workplace pension.

How much money will I get in my Workplace Pension?

There is no ‘one size fits all’ answer to this question, as it depends on how much money both you and your employer have contributed.

The minimum Workplace Pension contribution is 8%. Usually, as the employee, you will contribute 5% of your earnings. Your employer will then top this up with a 3% contribution to make up the full 8%. While this is the standard set-up, some providers may have different requirements.

You can increase your contributions if you’d like to start putting more money into your pension each month, and this can be arranged through your employer or directly with your provider.

When can I claim my Workplace Pension?

The age that you are entitled to claim your Workplace Pension varies between providers.

Most providers will grant you access between the ages of 60 and 65.

You can find the information relevant to your own personal pension plan in your terms and conditions.

If you do not yet meet the age requirements to access your pension you could consider applying for a payday loan if you are out of work to give you some cash in the meantime.  Some providers will even consider lending to people who have bad credit.

What happens if I leave my job?

Your Workplace Pension will remain active, even if you leave your job, although it will no longer be subject to payments from your employer. It may still be possible for you to make payments into your old Workplace Pension, but this will need to be arranged through your provider, and you will not receive any additional top-ups from your previous employer.

Another option may be to merge your pensions, by transferring the balance of your previous Workplace Pension into a private pension, or a new Workplace Pension. Again, this will depend on your providers, and will need to be discussed directly with them.

Private Pension

Private pensions are sometimes referred to as personal pensions. These are pensions that you have set up yourself, with whichever provider you choose, for an amount you choose to pay in.

The withdrawal age for private pensions varies between providers, but is generally from the age of 55.

Frequently Asked Pension Questions

Can I pay into different types of pension at once?

Yes, you can. You can make payments into both a workplace and private pension at the same time, and you will still be entitled to receive your State Pension in addition.

Can you take out multiple private pensions?

It is possible to take out more than one private pension; in fact, there’s no limit to the amount of private pensions you can have, although there is a limit to the amount you can pay in while claiming tax relief.

To avoid any confusion years down the line, it’s a good idea to keep a record of the details of each plan, including the various account numbers and provider contacts.

Where can I get advice about my pension?

If you have any queries relating to your specific pension plan, you should contact your pension provider.

Additionally, you can find general pension information on sites such as MoneyHelper and Citizens Advice.

Final thoughts

Paying into a pension could help to build up and secure an amount of money for your retirement. However, ultimately, only you can decide the best time to start thinking about your pension, and which type of plan is most suitable for you and your circumstances.