State Pension

At present, the State will provide you with a pension in retirement if you pay (or are treated as having paid) National Insurance contributions.

You cannot leave the basic State pension.

It is not an invested scheme: this means that the workforce paying into the pension pot now, are funding the people currently receiving pensions.

Demographics clearly show that with an ageing population, life expectancy in retirement increasing and a decreasing workforce contributing to the pension pot, the cost of providing pensions for all is unlikely to be sustainable.

It is therefore vital that each of us does not rely on the State pension for our retirement planning but plan for our own retirement through a stakeholder, personal or company pension.

The amount you pay in will depend solely on your National Insurance contributions and the number of years you have been contributing.

You are able to request a forecast of how much your State pension is likely to be. If you have missed years, you may be able to reinstate them by making a suitable payment.

How much will I get?  There is no way to know for certain what benefits you will receive from the State pension, since they are determined annually by the Government and are subject to change.

Currently the old age pension is £87.30 per week for a single person and £139.60 per week for a married couple (2007/2008), assuming you have made the maximum contributions.

To receive the full state pension you must have contributed approximately 90% of the maximum amount of years possible. As the maximum number of years is 49 years, this requires contributions of 44 years for both men and women (or 39 years for women who will retire before 2010).

These pensions are taxable (as for earned income).

Second State Pension (S2P)

This is the Governments' additional state pension, which took over from SERPS ("State Earnings-Related Pension Scheme") in April 2002.

It is based on your record of National Insurance contributions and your level of earnings as an employee. It does not presently cover self-employed individuals.

How much can I invest ?

There is currently no arrangement for you to pay extra contributions into S2P.

You are automatically a member of this scheme if employed and earning above the lower threshold limit. You are able to leave this scheme if you so wish and join a private or stakeholder scheme. This is called contracting-out. The private or Stakeholder scheme collects contributions from Government in lieu of your benefit into the S2P.

The decision as to whether or not to contract-out is a complex one and the solution differs from person to person.

How much will I get?

The amount you ultimately receive is dependent upon complex rules and the earnings of the member. For detailed up-to-date advice on State Pensions topics we recommend talking to us, or alternatively you can go to The Pensions Advisory Service (TPAS) website.