In addition to any Basic State
Pension a number of people may have qualified for:
- The State Graduated Scheme (1961 - 1975).
- The State Earnings Related Pension Scheme (1978 - 2002).
- The State Second Pension (from 2002 onwards).
Changes made in 1988 meant that individuals could, if they chose to, contract out of the
State Earnings Related Pension Scheme (SERPs). SERPs was replaced from April 2002 by the
Second State Pension (S2P) and again people could contract out if they chose to
(although this is no longer the case).
Being contracted in or out can be critical in terms of the eventual benefits you
receive. Again, when you receive your pension forecast, any benefits you are
entitled to from the State Graduated Scheme, SERPS and/or the S2P will be
included.
It is a good idea to get a forecast well before you retire because if it
looks wrong you will have plenty of time to talk to them about it and ensure
that, when you receive it, your pension is correct.
Company Pensions
As well as any state pension benefit, most people have their own pension provision. The
majority of individuals will be in a company or occupational scheme run by their employer.
This could be a final salary scheme, a 'defined Benefits' scheme, where the eventual benefit is based on your salary at
the end of your career and on your length of service.
Your employer may offer a scheme based not on final salary but on contributions put in,
a 'Defined Contribution' scheme. Here contributions paid in while you are working build up
through investment to a "pot" on retirement.
With respect to both types of schemes, your employer will have made contributions on
your behalf and may have required some contribution from yourself.
It is possible to top up company pension benefits through Additional Voluntary
Contributions (AVCs) or possibly Free Standing AVCs, the latter being
independent of the company scheme.
Therefore a number of choices are available to maximise pension benefit.
Personal Pensions and Stakeholder PensionsThere are plenty of
other people, particularly self-employed individuals but also some
employees, who have a personal or even a stakeholder pension, whose pension
operates on a 'Defined Contribution' basis.
The A-Day revolution
A-day as it became known - April 6th 2006 - introduced the biggest shake
up in Pensions for a century and provided individuals with greater scope to
fund their retirement.
Under this pension simplification process eight different sets of rules
for different types of pension have been replaced with one single set of
rules for all pension plans
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