Do you have enough cash to retire?
1. First of all, check your state pension forecast by applying online at direct.gov.uk or by filling in form BR19, also available from Directgov.
2. Deferring your state pension will mean you receive a larger weekly amount when you do start claiming.
If you defer it for at least 12 months, you can opt to receive the payments in a one-off lump sum. Contact the pension service on 0800 731 7898.
3. It's possible to make up to six years' national insurance contributions to top up your state pension. HM Revenue & Customs (HMRC) will normally send you a letter detailing your shortfall. If not, you can contact HMRC on 0845 302 1479.
4. Check the value of your private pensions too. If you have gone for default funds, they may not be performing well.
A meeting with an independent financial adviser should help you with this and give you an indication of alternative funds you may prefer to use for your pension.
5. It's possible to make additional payments into company pension schemes. These are known as additional voluntary contributions and cost less than starting another pension.
6. Don't just take the annuity your pension provider offers you. The open-market option means you can shop around and compare rates from other providers.
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.
Additional voluntary contributions
If you’re a member of an occupational pension scheme but want to increase your contributions to help boost your income in retirement, this is where AVCs come in. An AVC is a top-up pension that sits alongside your company pension and is administered by your employer. You get tax relief on your contributions and, if you move jobs, you can apply to transfer your AVC plan to your new employer or your AVC your contributions have to stop with your old employer and you will need to start a new AVC plan with your new employer. An AVC linked to a company scheme is subject to the rules of the main pension. (See Free-standing additional voluntary contribution).