Pensions, Pensions, Pensions
Grab yourself a drink, preferably something stimulating, because everyone should learn about pensions, whether you like the idea of them or not.
What is a pension?
In it’s most basic format, a pension is a long-term savings plan, that you use for later life – i.e. retirement. Unlike other savings plans this one cannot be acquired until a particular age.
Why do I need a pension?
When you reach retirement age (age 66 for men and women from October 2020) what happens next? Assuming you aren’t planning to work until you drop dead, haven’t amassed lots of savings etc, what now?
Assuming you earn £2000 per month. You retire at age 66. Great. But, hang on. Until last month you were receiving £2000 a month. Now this becomes a big fat juicy zero pounds. £0
This brings lots of questions to the forefront, such as:
- How am I going to pay my mortgage or rent?
- Where will I get money for my gas, electric, phone, wifi etc?
- Where will I get money for food, the car, vet bills, holidays, insurance, Christmas etc?
Here are you options to these problems:
- You carry on working if you are able to.
- You get a part-time job.
- You become poor and homeless or become a burden to your children?
- Or you say ‘Ah ha!, I don’t have to worry because I have a Pension!’
What kinds of pensions are there?
Technically there are lots, but the main two in the UK are known as Scheme Pensions and State Pensions.
A pension scheme is something you you and possibly your employer pay into, to help boost your income alongside your state pension. Often you pay in and so does the employer.
You can claim a state pension (provided by the Government) once you reach age 65. From October 2020 this will raise to the age of 66. It pays a maximum of £175.20 per week, paid every 4 weeks into your bank account – so £9110.40 per year to live on… we know what you’re thinking.