Getting started
What is a pension and why do I need one?
A pension is a source of regular income to live on when you retire and is one of the most effective ways to save money for retirement. This is because you can get get tax relief on the money you save in a pension scheme.
Most pension schemes work in broadly the same way. While you are working, you pay a small part of your wages into the pension fund – or, in the case of the State Pension, you pay National Insurance to the Government directly from your wages. When you have stopped working, or reached State Pension age, you then receive regular payments based on the amount you have contributed.
Everyone needs money to live on when they retire but few people spend enough time thinking about long-term savings. Because more people are living longer, your retirement could make up as much as a third of your life. So when you do retire, you will still need to pay bills and to have money for making the most of your increased leisure time.
There are a number of different types of pension:
- the State Pension - this is made up of the basic State Pension and the additional State Pension
- Private pensions – these include occupational pensions (also known as work or company pensions) and personal pensions (including stakeholder pensions)