Please help us - we don't understand pensions

clareandlee

Hi Guys, I hope you can help.

Hi my partner is 30 and has just started a new job as a civil servant working for part of the job centre. He has been offered a pension. Something like if he pays 3% they will match this.

We do not have any savings or any other type of money put away and now want to start settling down and becoming a bit more sensible.

First of all-

1-Does everyone get a pension from the government when they retire? regardless whether or not they also have this other pension they and their employer have contributed to?

2- He will be earning roughly £16,500pa so I have worked out if him and his employer were to put 3% of his earnings in it would be £990 a year going in. Making that almost £35k in there by retirement age. Is that your money to keep them or does some of it get taken away?

I am sorry I cannot explain this tidy. I am 19 and do not yet have any knowledge in this field. To me at the moment it just looks like he would be paying £485 a year into a pension, therefore bringing home that much less a year when he will get money off the government anyway when he retires so is it worth it.

Is it that you get the government pension then what you have saved up you get on top of it.

Sorry if I have said anything to offend anyone with this but I am just trying to get my head around it.

Thanks Clare

Paul_Herring

clareandlee wrote:

1-Does everyone get a pension from the government when they retire? regardless whether or not they also have this other pension they and their employer have contributed to?

Yes, the state pension is in addition to any other pension you may have cntributed to.

2- He will be earning roughly £16,500pa so I have worked out if him and his employer were to put 3% of his earnings in it would be £990 a year going in. Making that almost £35k in there by retirement age. Is that your money to keep them or does some of it get taken away?

Currently, 25% of this money may be 'withdrawn' tax free on retirement (currently at 55.) The rest must be used to supply a pension (either by purchasing an annuity, or by drawdown) and will be taxed.

To me at the moment it just looks like he would be paying £485 a year into a pension, therefore bringing home that much less a year when he will get money off the government anyway when he retires so is it worth it.

The state pension is (usually) insufficient to live on. Most people are advised to make some extra provision for an income in retirement. A personal pension is usually considered the main way of doing this (there are others)

In addition the 3% employer contribution is 'free money' - he would essentially be taking a pay cut by not contributing at least 3% of his wages to get this.

Techno

Hi Clare
Pensions are confusing and it's always a good idea to get some advice and there is lots of it onthis website
At the moment (and who knows how things will have changed by the time you both retire) you get your state pension which is about £85 per week and will, for you both, be based on paying 30 years national insurance contributions plus the govenment make it up to (I think) about £105 per week - wayhay - Your pension isn't affected by the company pension but pension credit is. However your partners employer is in effect offering a 3% pay rise so it's probably worth taking especially as we don't know what the future holds. Well done for starting to plan early - the younger you start the more you have at the end

clareandlee

Thanks guys that is such a help and a lot clearer now.

One question though, if you have to have 30 years NI contributions by the time you retire how can elderly people I know that have never worked in their life be having a pension right now?

EdInvestor

clareandlee wrote:

One question though, if you have to have 30 years NI contributions by the time you retire how can elderly people I know that have never worked in their life be having a pension right now?

If they are elderly ladies, they may get the pension on the basis of their husband's contributions.Stay at home mums and other carers also get credits for the state pension.

Other people may be receiving pension credit, which is a mean tested benefit, rather than an actual pension.The state pension is not a benefit, it's an entitlement.You don't get it unless you pay NI and it's not means tested.

By the way there are 2 state pensions - the basic and the S2P top-up.If you get the full amount of S2P it will double your basic pension.

You partner should get a state pension forecast to see how much he's clocked up already. Apply here:

https://www.thepensionservice.gov.uk

clareandlee

Also they have told him he has the choice out of a partner pension or premium, whats the difference please and which is best.

Andy_L

Premium is the final salary pension with 3.5% employee contributions and employer contributions of ~17-26%

Partnership is the money purchase scheme with choosable employee contributions and a matching employer contribution of up to 3% plus an extra employer contribution of 3-12.5% dependent on age.

All info is here

http://www.civilservice-pensions.gov.uk/

Which is best? at his age probably premium although it depends how long he intends to stay with the civil service.