pension system

[Deleted User]

savier wrote: »

the "NI" (National insurance) contributions are included in the tax that is being deducted from our salary? (ie. the 20% for salaries up to 35,000pa)

as for the professions that are unhealthy and can retire sooner, is there any legislation in UK?

Yes, National Insurance contributions are fixed and treated in the same way tax is, you can consider them part of your tax if you like -- that's what most people do, but they are separate deductions that will be itemised on your pay slips.

This website has a calculator that will tell you what amount of National Insurance you're paying (as well as tax) depending on your salary: listentotaxman.com, and you can read about National Insurance on the government information site: gov.uk/national-insurance/overview.

The state pension is not your only option, far from it, the state pension just exists as the "default" pension that everyone gets if they've worked enough (or in some circumstances have been married to someone working) so they can afford to live in retirement, you absolutely should have your own personal pension on top of this. If you get to retirement with ONLY a state pension it's considered to be really not good.

Most big employers provide pension provisions for employees through private pension providers (not state run!) (and there are changes at the moment mandating more employers provide pensions), where they contribute a percentage of your salary which is combined with your contributions of a percentage of your salary (pre-tax) that then has government provided tax relief (if you pay 20% tax, the government will match your contributions with an extra 20%, eg: you contribute £100, government increases it to £120) added on top (and for some people salary sacrifice).

The options you have are numerous, you could opt to just contribute the amount required to meet your employers contribution match, or you could opt to far exceed that for the extra tax relief, it all depends on your long term goals, whether you want to save outside of a pension, maybe you want to buy property... etc etc etc

Your best bet would probably be to talk with a financial advisor because they can get all the information needed from you, however people here can give you a better idea of what might be best if you can provide the following information:

- Age
- Salary
- Excepted raise (eg: 5% every year; or no expectation of getting a raise until retirement)
- Required amount to retire on (eg: 70% of current salary)
- Desired retirement age

For me personally I contribute 10% to my pension, my employer matches up to 7%, then I get tax relief (40%) and salary sacrifice.

somethingcorporate

savier wrote: »

somethingcorporate how much does your employer pay? (percentage)

9%, I pay 11%.

As per the above very helpful post I get higher rate tax relief on this. I am also heavily into my employers share-schemes as part of my retirement plan as these are also tax advantageous, these account for around another 10% of my salary so all in all around 30% being invested for my retirement. I have just run the numbers through a pension calculator and assuming I retire at 65 my 20% into the pension should allow me to enjoy a pension of roughly 60% my annual salary.

jennifernil

savier wrote: »

yes, what mc4924 said

how can I end up with a pension of around 80% of my last salary?

I read both these links and I found them a bit complicated...

Things will of course depend on the lifestyle you aspire to, and the salary you hope to have, but.....

80% of your pre-retirement salary is a very high expectation, even combining State and employer schemes, and would require you to pay in a very high % of your salary.

If you use one of those pension calculators, it will give you an idea of roughly how much you would need to contribute.

However, have you considered whether you would actually NEED that much to maintain your standard of living?

You could take into account several factors, e.g.....

your mortgage would (should) be paid off, so outgoings on housing will be lower

you might choose to downsize to release capital

you will no longer need to pay to commute to work

you will no longer need to buy smart work clothes

you do not pay any more NI after you reach State Retirement Age (this might change in the future)

if you have been a "2 car family", you may be able to go down to one car

as any children will usually have been off your hands for a while, you will have been able to save what you used to spend on them, so should have additional income to supplement your pensions.


We are both retired (since 2007), my husband is fortunate enough to have a decent Final Salary pension. Our combined incomes from ALL sources (pensions, dividends, bank interest) is now about 60% of our immediate pre-retirement income. Could have been a bit more, but we chose to take a large Tax Free Lump Sum, which we have put to good use.

We are mortgage free, run a large 5 bed house, 2 cars, live well, save for our grandchildren, take 3-4 months away each year, and still have money over to save as a hedge against inflation, all out of £40k (after tax).

Even with only £15k we could still "tick over", the rest is what makes retirement more enjoyable.

BobQ

savier wrote: »

hello

I am soon to start a career in UK and I would like to ask you to outline me the UK pension system in few lines

in my country we have this system:

every employee pays a percentage of his salary to the state and his employer contributes also with another percentage

after gathering a specific number of years of work, he is entintled in a basic pension and if he gathers additional years his pension is proportionally increased

in case an employee works in an unhealthy profession (eg. factory worker), he can retire in less years than the other employees, getting the same basic salary

is the system the same in UK?

can you tell me how is it and how I should plan my career to take full advantage of it?

thanks

Have you looked at the MSE advice on pensions on this site.

The point about the UK system is that is a basic pension provided by the state which as has been said will grow to a maximum of £144 per week (today's prices) based on the number of years of NI contributions you build up post 2015 (or whenever its introduce).

Occupational pensions currently take many forms:

(a) Defined Benefits (linked to your final salary and the number of years of contributions) and quite popular in the public sector and professions.

(b) Defined Benefits (based on a % of your pay each year uprated for inflation - known as Career Average )

Both (a) and (b) are guaranteed by the employer and the individual contributions of an employee and the employer are only loosely related to the benefits paid since the employer underwrites any shortfall or skims the excess.

(c) Defined Contribution Schemes in which employer and employee pay defined % of salary into a group or personal fund which then pays out pension based on an annuity that promises to pay a pension of a stated value with some inflation increases.

(d) Personal Pensions (a form of Defined Contribution scheme) that individuals or self employed people contribute to and draw benefits via an annuity.

(e) No pension. At present many UK citizens do not pay into a pension, so will retire on the basic state pension.

(f) To address (e), the Government has introduced a more basic defined contribution scheme that employers are required to join but can decide to opt out of. Employers will be required to contribute to this but at present it only applies to large firms.

Overall, a large proportion of UK citizens will retire on the state pension supplemented by (f), another large proportion have defined contribution schemes. The lucky ones have defined benefits but these are increasingly being based on career average not final salary.