15 September 2019 is Pension Awareness Day, a national campaign to highlight the growing problem that many people are not saving enough for their retirement and risk facing pension poverty in later life. Our Money Advice Officer is here to help Warrington residents understand their rights and the advantages of saving for retirement, and to help pension age residents make ends meet.
What is a pension?
A pension is a long-term investment to provide an income after you retire so you can continue to have a comfortable lifestyle and pay your bills when you are no longer working. There are three main types of pension:
State Pension, which is paid by the Government and is based on the National Insurance Contributions or Credits you accumulate during your working life
Company/Workplace Pension, which is a scheme set up by your employer where they will pay a percentage of your wages into this and also make a contribution themselves. This also reduces the amount of income tax you pay.
Personal/Private Pension, which is an extra pension you arrange yourself with a company who invests your money for you and then pays it to you as an income when you retire.
What happens to my money?
The payments you make to your pension provider are usually invested, for example in stocks and shares, so the money can grow over time. There is also a lot of tax relief which helps your pension pot get bigger faster so you have a better income in retirement.
Why should I save into a pension?
The main advantages are that you will pay a lot less tax so you will have more money when you retire, your employer will pay towards your workplace pension which will mean the value will go up much faster than if you saved the money elsewhere, and you will have less money worries and be able to maintain a good standard of living when you retire. You can even take a cash lump sum when you reach 55 years old.
What happens if I don’t save enough?
The Government has set a minimum limit on the amount of income you can have when you reach retirement age, and if you fall below this limit you can apply for a means-tested benefit called Pension Credit to top-up to this amount. However, the rates are quite low and it would be much better to save for retirement so you can have a better standard of living.
If you have a workplace or private pension, you need to be wary of scammers targeting you. These are usually cold-calls or adverts offering pension reviews which try to persuade you into transferring your pension into their scheme for better rewards. If you are considering transferring your pension, make sure you research the company thoroughly, check they are registered with the Financial Conduct Authority and remember; if it looks too good the be true, it probably is.
Where to get help
Our Money Advice Officer can offer general help and information about this topic but cannot give financial advice about specific pension products. For more specialist advice about your pension options if you are 50 or over, you can contact Pension Wise. The Pensions Advisory Service can also help with any queries about workplace or personal pensions.