Additional State Pension
You may also be entitled to an additional State Pension. For instance,
if you're in full-time employment and make class 1 National Insurance
When you retire and claim for a basic State Pension
any additional State Pension due will be added.
If you've been a member of a company pension scheme
you may have paid a lower rate of National Insurance contributions
which will have qualified you only for the basic State Pension.
If you do this, most or all of your second pension will come from
your company pension rather than the State Second Pension.
Personal pensions are available from banks, building societies
and life insurance companies, who invest your savings on your
You can start receiving an income from a personal
pension from the age of 50 (increasing to 55 by 2010).
There's no limit on the number of personal pension
schemes you can set up, and any contributions you make won't affect
your entitlement to the basic State Pension. Non earners may be
able to pay into a personal pension.
You can save as much as you like into a personal pension.
Each year you'll be able to get tax relief on your pension contributions
up to 100 per cent of your earnings (salary and other earned income)
subject to an 'annual allowance' above which tax will be charged.
In practice this means that for each pound you put into your pension,
the government tops up your pension pot using money it would otherwise
have taken from you as tax. Read 'Pension rules from April 2006'
for further details.
Stakeholder pensions are a type of personal pension. They have
to meet certain government standards to ensure they are good value.
pensions are open to everyone and may be worth looking into if
you are self-employed or if your employer doesn't offer a company
pension. They allow you to contribute as little as £20 a
month. You don't have to be working to contribute to a stakeholder
pension, and you don't have to contribute every month if you're
pensions, you can start receiving an income from the age of 50
(increasing to 55 by 2010). You get tax relief on stakeholder
pension contributions – up to the annual allowance described
Company (occupational) pensions are set up by employers for their
In most cases,
your employer will make contributions to the scheme on your behalf
and require that you make regular payments from your salary.
pension may also offer a death benefit, which is paid to your
partner if you die before them. Your employer may also provide
you with a pension before the normal retirement age of the scheme
if you need to retire early due to ill-health.
you leave your employer you are unlikely to be able to continue
making payments into the pension scheme.
You get tax
relief on your contributions to company pensions – up to
an overall annual allowance, as described earlier. Some schemes
may offer you the opportunity to carry on working while drawing
your company pension.
personal pensions through your employer
Some employers offer access to a personal pension scheme. They
may also have negotiated lower administration costs with pension
providers and make contributions to your pension themselves.
will usually select a pension provider (for example a bank or
life insurance company) and choose a pension scheme which they
think will be suitable for their employees. Such an arrangement
is called a group personal pension plan (GPPP).
taken out through a GPPP is a personal pension and should not
be confused with an occupational pension scheme. You get tax relief
on your contributions, as described earlier.
If you decide
to leave your employer you may still be able to make payments
into your pension, but you may pay higher administration costs.
for the self-employed
If you're self-employed you make class 2 National Insurance contributions.
These will entitle you to the basic State Pension, but not the
additional State Pension.
If you want
to receive more than the basic State Pension when you retire,
you might want to consider starting a personal or stakeholder
pension scheme. You'll then be able to make regular payments to
build up savings for your retirement.