Navigating through the minefield of choices
If you’re thinking of retiring soon, we can help you navigate through the minefield of choices that you are likely to face and ensure that you receive the pension and other benefits you are entitled to.
You may be entitled to a basic State Pension (and an additional State Pension) if you’ve reached State Pension age and you, or your husband, wife or civil partner, have paid or been credited with sufficient National Insurance Contributions.
If there are gaps in your contribution record, then you might want to consider paying extra contributions to get more State Pension. If you have taken time out of paid work to have children or care for someone, your right to the State Pension may be protected during these periods by Home Responsibilities Protection.
Usually, you will get an invitation to claim your State Pension four months before you reach State Pension age. If you haven’t received this three months before you are due to retire, get in touch with the Pension Service.
You can delay claiming your State Pension when you reach State Pension age, or choose to stop claiming it after you have already claimed. This allows you to build up extra income or to get a taxable lump-sum payment.
How and when you get your work pension depends on what type of pension scheme you belong to, so find out from your employer what you have. This could be an occupational salary-related (also called defined-benefit or final-salary) scheme, an occupational defined-contribution (or money-purchase) scheme, or a Group Personal or Group Stakeholder pension plan.
Remember that if your pension is directly dependent on investment returns, it will affect the level of income you’ll get in retirement.
You can draw a pension from your employer’s occupational scheme and carry on working, so long as the scheme rules allow this.
You may have a personal or stakeholder pension if you were self-employed at any time or if your employer didn’t offer an occupational scheme. Both are money purchase pensions and are dependent on investment returns, so this will affect the level of income you’ll get in retirement. You don’t have to stop work to start drawing a personal or stakeholder pension.
If you’ve worked for other employers or may have other private pension schemes, such as a personal or stakeholder pension, contact the companies involved. If you’ve lost track of a pension you had, you can contact the Pension Tracing Service.
If you’ve contracted out of the State Second Pension (formally SERPS) you could have a personal or stakeholder pension into which your rebates have been paid.
If you’ve been working and saving into a personal or work pension, you will have the option to take some of it (up to 25 per cent) as a tax-free lump sum when you retire or to leave it invested in your pension fund. If you take a lump sum, this will reduce the amount of money left to provide you with your income in retirement. Think about whether you want to take it and what you plan to do with it.
After deciding whether to take any tax-free lump sum, you then usually have to convert what’s left of your pension fund into income. For most of us, this will mean buying a lifetime annuity. If you have a wife, husband or civil partner who depends on you, you will need to consider whether you want to buy a joint-life annuity.
If you have a salary-related pension scheme, you don’t have to buy an annuity, as your pension will be paid to you direct.
If you’re ready to buy an annuity, talk to us so that we can discuss with you what your pension provider is offering and then shop around and compare annuity rates to find any other better deals that may be available.
The income you get from your pension fund is usually taxable. You may pay less tax once you retire, so check you’re not paying more than you have to.