Types of pensions schemes

A-Level: Economics

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Types of pensions schemes
Basic State Pension
You can get a basic state pension by building up enough 'qualifying years'. A qualifying year is a tax year in which you have sufficient earnings upon which you have paid, are treated as having paid, National Insurance contributions. From state pension you can claim the basic State Pension at the current age of 65 for men and 60 for women born on or before 5 April 1950. The State Pension age for women born on or after 6 April 1950 will increase from 60 to 65 between 2010 and 2020, and will increase for both genders from 68 between 2024 and 2046. If you don't claim your state pension as soon as you reach State Pension age, then you can claim it later and get a higher weekly amount or take the option of a one-off taxable lump-sum payment in addition to the normal state pension.

Personal Pensions

Banks, building societies and life insurance companies, who invest your savings on your behalf, can offer you personal pensions. You can receive an income from a personal pension from the age of 50 increasing to 55 by 2010. There is 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. You can contribute 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 e.g. salary. 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.
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