Planning for retirement

Saving into a pension

You may not have 'save for my retirement' at the top of your list for ways to spend your hard earned cash. However, over half of the UK population are not saving enough (or at all) for their retirement. This means that over half of the UK population are facing 'retirement poverty'.

You may have noticed that there has been a lot of news surrounding pensions recently and whilst it may seem boring and complicated, it is very important that you take some time to understand the basics and make plans to ensure that you are saving enough for a comfortable retirement. It is also important to plan to ensure your pension lasts. Recently introduced pension freedoms give us greater flexibility and access to our 'pension pots', but whilst it might be tempting to dip into our pension early the last thing we want is to take too much too soon and then run out of money.

What is a pension?

Most pensions are 'defined contribution' schemes, which are long term savings plans with added tax relief.  You make contributions throughout your working life, so that when you retire you can use those savings to provide yourself with an income throughout your retirement.

Most people, who are already saving into a pension, contribute into the pension scheme provided by their employer. The amount you and your employer contribute varies based on the scheme you are in. Some employers provide 'final salary' or defined benefit' pension schemes, which provide a pension linked to pre-retirement earnings depending on how many years you have worked for the organisation.


Up until now employers haven't had to provide their employees with a pension scheme which they can pay into. A law introduced in 2012 stated that all employers must offer a workplace pension scheme and automatically enrol eligible employees in it. This applied to larger employers from October 2012 and will be applicable to all employers by 2018.

Until recently it has been your decision to join your employer's pension scheme. Now, all eligible employees will be enrolled by 2018 unless you choose to opt out. The Government has introduced this new law to try to ensure that people have enough savings for their retirement needs.

The minimum contribution is currently set at 2% of what you earn annually. This is split between you (0.8%), your employer (1%) and the remaining is tax relief (0.2%).

State Pension

You are likely to be entitled to a State Pension. This is paid to you once you reach State Pension age. In order to qualify for the full basic State Pension you need to have paid 30 years of National Insurance contributions. If you do not have a full 30 years of contributions you will receive less on a sliding scale. The State Pension isn't enough for most people to live comfortably on.

The Government is planning to introduce a new flat rate State Pension which will pay about £144 a week in today's money and you will need to have 35 years of National Insurance contributions to receive the full amount. This applies to anyone who reaches State Pension age on, or after, 6 April 2016.

You can search for an adviser local to you here »