Pension power for you

Contents of this page:

• Getting through the pensions maze
• The basic state pension
• State Earnings Related Pension Scheme - SERPS
• Occupational pension schemes
• Personal pension schemes
• Your questions answered
• Why people start pensions
• Here’s where to go next for more information

We all need to start thinking about saving for our retirement.

And the sooner you start saving for a pension, the better off you will be when you retire.

Getting through the pensions maze

Getting the pension that’s right for you need not be a frightening experience. Here’s a basic guide to your pensions options.

There are basically four types of pension scheme. You will probably be entitled to one or more of these. To help you find the right pension, you might want to think about speaking to an authorised independent financial adviser.

The basic state pension

In 1999 the basic state pension is worth £66.75 a week. This is what you’ll get if you’ve paid enough National Insurance contributions for enough of your working life. If you’ve not paid enough contributions you may still be entitled to some state pension.

Men can get their basic state pension once they’re 65. Women born before 6 April 1950 can get their state pension at age 60. Women born after 6 April 1955 will have to wait until age 65. Women born between these dates will be able to get their pension between 60 and 65, depending on their date of birth.

The basic state pension is not enough to live on by itself - so you might want to think about making some extra pensions savings.

State Earnings Related Pension Scheme - SERPS

This is a top-up pension scheme provided by the Government. It gives you a pension related to how much you earned during your working life. Generally speaking, if you are not in an occupational pension, or if you don’t have a personal pension, you will be in SERPS. When you retire, the amount of pension you get depends on how long you were in the scheme and how much you earned during that time.

The Government is planning on replacing SERPS with a new type of scheme from 2002, but if you are already receiving SERPS, or if you expect to have SERPS benefits, they will still be paid when you retire.

Occupational pension schemes

These are pension schemes which employers provide for employees. They are also called company pension schemes. Your employer will normally pay towards the benefits you will get and you will normally be asked to pay something too. These are generally considered to be the best type of pension. So if you have the chance to join an occupational pension scheme, you should think about it very seriously. An occupational pension scheme will generally give you:

• a regular income when you retire; a tax free lump sum when you retire

• benefits if you have to retire early, for example because you are too sick to work

• benefits for your husband, wife, partner and children when you die.

Personal pension schemes

These are pension arrangements you make yourself, for example because you are self-employed or cannot join an occupational pension scheme. You can get a personal pension from a bank, building society or insurance company. When you retire, the amount of pension you get depends on how much you have saved, how well it has been invested and interest rates. Before signing up for a personal pension, remember to read the small print. Always find out how much you are paying the person or company selling the personal pension and how much the pension company will take from your contribution to meet their charges. Ask an authorised independent financial adviser for further advice. You can find one by calling Money Management National Register of Independent Fee-based Advisers on 0117 976 9444 or IFA Promotion on 0117 971 1177.

Your questions answered

I don’t know if I’ve got any pension. What can I do?

You might have more pension than you think, for example from a previous job. If you earn more than £66 a week, you may be building up rights to a state pension and to the State Earnings Related Pension Scheme and the basic state pension.

How can I find out about how much state pension I’m entitled to?

You can find out by asking the Department of Social Security. Ask for a BR19 form at your local Benefits Office. Fill it in and they will write back to you with the answer. Or you can call the Retirement Benefits Forecasting Agency on 0191 218 7585 to find out the answer. You will need to tell them your national insurance number which you can find on your payslip.

How can I find out about pension schemes I belonged to in the past?

You can find out about pension schemes you belonged to in the past by calling the official Pensions Tracing Agency on 0191-225 6316. The agency’s services are free.

I’m getting divorced - what happens to my pension?

Any pension rights must be considered as part of the divorce settlement. If you are getting divorced, you should ask your lawyer about this.

I belong to the pension scheme where I work, but I don’t think it will give me enough to live on when I retire. What can I do to save more for my retirement?

You will probably be able to make extra payments into your pension scheme to earn more pension. This is called making additional voluntary contributions (AVCs). AVC arrangements are available through your occupational pension scheme – ask your pensions department about this. Or you can make your own AVC arrangements through a bank, building society or insurance company, although these are usually more expensive than arrangements you make through your occupational pension scheme.

I’m self-employed. What can I do about a pension?

If you are self-employed you cannot join an occupational pension scheme or take part in SERPS. To provide for your retirement you will have to take out a personal pension from a bank, building society, insurance company or other pension provider. Read the small print of the scheme before signing up. Check the scheme charges and the commission you will have to pay to the person or company selling you the pension. If you are in any doubt about your position, contact an authorised independent financial adviser.

I work part-time - can I join the pension scheme where I work?

Yes. You have a legal right to join your company pension scheme.

I’m going on maternity leave – what happens to my pension?

You can carry on building up pension rights while you are on paid maternity leave. Check the details with your personnel department.

Can I move the fund I have built up in my personal pension to my new company pension scheme?

You can usually do this. Ask the pensions department at work about this. Before making a decision, you will need to check whether you will be charged for moving your personal pension, and what these charges will be.

I gave up work when my children were born. What happened to my state pension while I wasn’t working?

If you stopped working after 1977 to look after children you will be credited with national insurance so you will be entitled to the basic state pension. These credits are called the Home Responsibilities Protection.

What are Stakeholder Pensions and when can I join one?

Stakeholder Pensions are a new type of pension scheme which the Government wants to introduce for people earning between £9,000 and £18,000 a year and who cannot join an occupational pension scheme or afford a personal pension. You can join a Stakeholder Pension scheme from 6 April 2001 onwards.

There is no pension scheme where I work – what can I do to start a pension?

If you earn more than £65 a week, you will be in SERPS. You could stay in this scheme or you could think about taking out a personal pension. Check what the charges are for setting up a personal pension. Also check if you will have to pay extra charges if you decide to move your personal pension to a Stakeholder Pension after 2001.

Why people start pensions

Julie is 30 and has just had a baby. When she goes back to work she is going to join the company pension scheme because a pension will give her family benefits if she dies.

“I want to make sure my family will be OK if anything happens to me”

Morris is 23 and has just started work with the local council. He has joined the pension scheme.

“I want to be well off when I retire, so I need to start saving early. You can never start thinking about pensions too soon”.

Andrew has just started his own business, so he has taken out a personal pension.

“When I was employed, I had a company pension scheme. This showed me the value of having a secure income when I retire. I want to make sure the same is true now I’m self-employed.”

Here’s where to go next for more information...

For help and advice if you’ve got a problem with your pension

OPAS - the Pensions Advisory Service. Call 020 7233 8080

If you think there is something wrong with your occupational pension scheme

Occupational Pensions Regulatory Authority (Opra). Call 01273 627600.

If you have a complaint against your occupational pension scheme

The Pensions Ombudsman. Call 0171-834 9144

If you have a question about personal pensions or want to find out if an independent financial adviser is authorised

The Financial Services Authority (FSA). Call 0845 606 1234

For free Financial Services Authority leaflets on pensions and other types of investment

FSA leaflet line 0800 9173311.

For free DSS leaflets which cover many occupational and state pension matters

DSS order line. Call 0345 31 32 33

If you want to find out about state pensions

DSS information line. Call 0171 712 2171

To find out about pensions from you’ve lost track of

Pensions Tracing Agency. Call 0191 225 6316

If you want to know how much state pension you’ve got

Retirement Pensions Forecasting Agency. Call 0191-238 7585

Pension Power for You is a TUC partnership initiative supported by the Department of Social Security; Unity Financial Services, the financial services provider for trade union members; Financial Services Authority; Occupational Pensions Regulatory Authority; National Association of Pension Funds; CBI; Engineering Employers’ Federation; Prudential Corporation; Merrill Lynch Mercury Asset Management; Association of British Insurers; The Association of Unit Trusts and Investment Funds.

We are grateful for the Plain English Campaign’s support in producing this page which is based on the TUC's Pension Power for You Know Your Rights leaflet.