Uk pension how does it work

Pension withdrawal Pension withdrawal basics How to withdraw money from a pension fund Can I cash in my pension? Pension lifetime allowance Should I take a lump sum from my pension? What is a deferred pension? What is income drawdown? When can I claim my pension? The pension withdrawal rules Taking an early pension Income drawdown charges How does pension drawdown tax work?

Emergency tax on pensions Early pension release rules Money purchase annual allowance. Pension rules after bankruptcy What happens to my pension if I am made redundant? What happens to my pension if I move abroad? What does capital at risk mean? How much tax do you pay inside IR35 on pension contributions?

Pension protections What is the Pension Protection Fund? What is the FSCS? What is the Pensions Ombudsman? What is the Pensions Regulator? Pensions and ill health What happens to your pension when in hospital? Pension and divorce rules How long after divorce can you claim a pension? Retirement planning Preparing for retirement What qualifies for ill health retirement?

What is pension liberation? Reducing working hours prior to retirement Releasing equity for retirement Managing your retirement Can I take my pension at 55 and still work? When should you buy an annuity? How much money do you need to retire in the UK? Mental health in retirement What is a target date fund?

The different types of pension There are several types of pension within the UK, and how each type works differs slightly. You can only do this once. The extra pension can be paid as an increase in your weekly rate of State Pension. This works out at Your pension will not increase if you defer while you or your partner receives certain benefits, such as Pension Credit. You need 30 qualifying years of National Insurance contributions to get the full amount.

Your pension won't increase if you defer while you or your partner get certain benefits, such as Pension Credit. You need 35 qualifying years of National Insurance contributions to get the full amount. Contracting out has ended under the new system. The extra pension will be paid as an increase in your weekly rate of State Pension.

This works out at about 5. You need 44 qualifying years of National Insurance contributions to get the full amount. The amount of State Pension you get depends on your National Insurance record. Your National Insurance record includes National Insurance contributions that you pay when you are working and contributions that are credited to you when you are unable to work.

Your record can also include voluntary contributions that you choose to pay to cover gaps when you are not working or getting credits. When you reach State Pension age, you can claim a State Pension if you've paid or been credited with enough National Insurance contributions during your working life. Each tax year 6 April to 5 April that you pay or are credited with National Insurance contributions counts as a qualifying year, provided you earn or are credited with earnings of at least a minimum amount.

This amount changes every year. There is a time limit for doing this. When people reach state pension age currently 66 , 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 — you can read more on this in our guide, your state pension and benefits.

The state pension will not be able to provide all your retirement income, so most people also save into a pension with their employer. Workplace pensions take contributions from you, your employer and the government, and use them to provide you with money to live on when you retire.

Your contributions will take the form of a percentage taken from your salary each month, and your employer's will also be added as a percentage of your pay. The fact that your employer pays into your workplace pension is one good reason for having one — it is like extra pay.

These contributions will be invested, with the aim of increasing the amount you have to retire on. Personal pensions are particularly suitable if you're self-employed or not in work, and so don't have access to a workplace pension.

But anyone can save into a personal pension. Financial Services Limited. Financial Services Limited is a wholly-owned subsidiary of Which?

Limited and part of the Which? Money Compare is a trading name of Which? Redundancy pay calculator. Universal Credit Find out how Universal Credit works and how to manage your payment. Tool Money Manager. Everyday money. Calculator Credit card calculator. Tool Couch to Financial Fitness. Calculator Baby costs calculator.

Calculator Mortgage affordability calculator. Calculator Mortgage calculator. Money troubles. Calculator Pension calculator. Calculator Workplace pension contribution calculator. Tool Find a retirement adviser. Calculator Redundancy pay calculator. What is a pension scheme? Is it too late to start saving into a pension? What if I die before I take my pension benefits? A long-term savings plan.

Find out more about how pensions work and why you should save into them in our guide Why save into a pension? Back to top. Find out more about it in our guide The State Pension. UK website. A pension scheme is designed to give you an income, alongside the State Pension. This depends on whether you have a defined benefit or a defined contribution pension.

Find out more in our guides: Defined benefit or final salary pensions schemes explained Defined contribution pension schemes. Need more information on pensions? Our help is impartial and free to use, whether that's online or over the phone. In most cases, your pension scheme will provide benefits on your death. Was this information useful? Yes No. Thank you for your feedback. Share this article.

Email Facebook Twitter. More options. Share this with. WhatsApp LinkedIn. Explore this topic Close Pensions basics. Starting a pension What is a pension scheme? Why save into a pension? The different pensions you can get if you live and work in the UK Workplace pensions Choosing a pension yourself Pension savings timeline.

Explore this topic Close Starting a pension What is a pension scheme? Talk to us live Talk to us live for…. Talk to us live for… Pensions guidance.