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 Employee Pensions


With state pension age increasing, savings for your retirement has never been so important if you wish to control your retirement. So what is a pension? A pension is a tax efficient 'wrapper' with the specific purpose of securing an in come for you when you stop working and reach retirement age. The government wants to encourage us to support ourselves financially in retirement and provides incentives to save in the form of tax advantages.

 So how do pension work?


Recent changes in pension legislation has meant that pensions are becoming a much more attractive proposition.  Most Work place pension schemes under the Automatic Enrolment scheme will be defined contribution pensions which in simple terms mens the employee contributes, the employer contributes and the tax man will contribute through a tax rebate.

This money will be invested in Stocks & Shares with the aim of growing to produce a pension pot at retirement. This pot will be used to buy an income.  New rules means that you can access the money in its enitirity if you wanted to athough it would be prudent to seek advice to ensure you are being tax efficient and are aware of the implications of accessing the money.

The State Pension

When people reach their state pension age , they will receive an income from the state, called the state pension.  To claim the state pension you have to have made National Insurance (NI) contributions throughout your working life.

There are two parts to the state pension, the basic state pension, which almost everyone gets, and the additional state pension, which is only for employees. You qualify for a full basic state pension by reaching state pension age and making 30 years' worth of National Insurance contributions. The second part is If your income is below a certain level, where you can boost it by claiming pension credit.

Why Saving in a Pension is important.

The government has a collosal welfare bill and therefore state pensions and topping up low income retirees is a financial time bomb. When the state pension was introduced avergae life expectancy was 64 and the state pension came into force age 65. As we are on average living longer the state pension age is likely to increase to reduce the burden on the state purse. This is already happening today with stage increases in the state pension age.

Quite simply unless you make you own provision for retirement you are likely to have to work longer and potential live close to the breadline. 

Workplace Pensions are just the start of the retirement savings process and it would be prudent to assess your retirement requirement with a professional adviser. Invest Southwest Independent Financial Advisers can offer this pension service.