What types of pension schemes are available?

There are two main types of pension scheme:  Defined Benefit (also known as Final Salary) and Defined Contribution (also  known as Money Purchase).  

A Defined Benefit pension usually  provides you with an annual income at retirement which is calculated based  upon your earnings at or near retirement (or date of leaving if sooner) and  the length of time you have been a member of the scheme.

For more information about Defined Benefit schemes click here.

In a Defined Contribution plan, contributions made by you and/or your  employer are invested in a range of different investments to  provide you with an income when you retire. The benefits you receive at retirement depend on the size of your  pension ‘pot’ and how you decide to take your benefits.

Some company pension plans contain both Defined Benefit and Defined Contribution  elements and these are commonly known as "Hybrid" schemes.

Remember, you may also have a State Pension based on your National  Insurance Contributions (NICs) record. You’re entitled to it when you reach  your State Pension age and it will continue until the end of your life.

When can I access my pension?

Once you reach 55 you can access your pension pot. You can take as much as you need from it, and any leftover in the pot will have a chance to continue growth.

You have a great deal of flexibility on how you can take your pension pot. Normally you can take part of your pot as a tax free lump sum.  What you do with the rest is up to you.  You can opt for an annuity that will pay you a guaranteed income for the rest of your life. You could move your money to income drawdown, so you decide how much to take out and when. You can take some out and leave the rest invested, have it all as one lump sum, or a combination of these.

There are lots of options. If you need help finding the options that best suit you, please contact your administration team.

You could also get to know the options you'll have at retirement here in one of our articles.

What is worth knowing is that, once you have had your tax-free lump sum, the rest of your pot may be taxed.

You don’t have to make a decision on what to do with your pension pot now, but it’s worth thinking ahead so you’re ready when it's the right time for you.

How much do I need to live on?

Everyone’s circumstances are different. Have you made a budget planner to identify how much income you'll need?  This includes monthly needs and occasional lump sums during the year – gifts, holidays, new car, home improvements?

Fill in our budget planner to help you work out what you need.

It's also worth noting that you have the freedom to choose whether you continue to work and how. You can choose to continue working even whilst receiving a State Pension. 

What should I do about inflation?

You may be concerned about inflation eating away at the value of your income.

There are steps you can take to protect your pension income against inflation, such as increasing annuities. There are also several ways to leave your pension pot invested so the money you don’t need now has the potential to grow.

Could I defer my Pension?

You can take your pension pot from age 55 if you wish. Your pension pot will continue to be invested until you decide to access it. You can claim your State Pension once you reach your State Pension age. However you don’t have to. Your State Pension will increase every year you put off claiming it.

But remember, you don’t get your State Pension automatically, you have to claim it.

You don’t get your State Pension automatically, you need to claim it. You should get a letter four months before you reach the State Pension age telling you what to do. So, if you have not been contacted about claiming it three months before your State Pension Age, call the State Pension claim line on 0800 731 7898.

You may also receive State Benefits upon receiving your State Pension

These could include:

• Winter fuel payment.
• Housing benefit.
• Council tax support.
• Carer’s allowance.

For more information visit www.gov.uk.

Who is eligible?

If you have paid, or been credited with, National Insurance Contributions (NICs) for a minimum of 10 tax years, you’re eligible for a State Pension.

The State Pension age varies depending on when you were born but is expected to increase gradually to 68 by the mid 2030s. To find out when you will be entitled to collect your State Pension, use the Government’s State Pension Calculator.

What will you get?

The amount you will get from the State Pension will largely depend on how many years National Insurance Contributions (NICs) you have paid or been credited with up until State Pension age.

HM Revenue and Customs(HMRC) see your State Pension as an income, although you do not pay tax on it directly. If your yearly income goes over your personal allowance (the standard personal allowance is £12,570 in tax year 2024/25), the tax due will be taken from any additional income you receive and paid according to the tax bracket you fall into.