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Thinking about retiring? There are many options available in Britain today.
The State Pension is based on a worker’s National Insurance Contributions, which come right off his or her paycheque. A self-employed person or one without a job may also make contributions to ensure eligibility for a State Pension. The State Pension is not automatic, but depends on a person’s having worked and/or made full-rate contributions for at least 90% of his or her working life, which begins at 16 or so when leaving school.
Maximum contributions will bring you a guaranteed £92.15 a week if you are a single person. A couple receives £140. Since the State Pension is supported by current workers’ contributions, the outlook is not cheery for the aged in a future with fewer and fewer young workers.
You can build State Pension credit working in other EU countries, and you can retire (and collect) almost anywhere in the world.
You might also qualify for the State Second Pension, which is an additional amount based upon how much you earned in your career. When you are nearing retirement age (and this age is going up), the government will calculate how much this amount could be.
You can also start a Personal Pension, where you can contribute as much as you like to your fund, and receive a tax benefit that can equal your year’s income from salary and regular investments, up to £255,000 beginning in 2010. Even if you do not work and make only modest contributions to your Personal Pension, the government will match your money – put in £80 and the government will add £20, until your yearly contribution reaches the maximum of £3600.
There’s the Stakeholder Pension, much like the Personal Pension, except that the fees to manage the fund are much lower. Investments are placed in passive “tracker” funds, so Stakeholder funds are not managed with quite the same attention as those attended to by a fund manager as in Personal Pension investments. However, some say the Stakeholder plans’ lower fees may offset the differences in earnings.
A Company or Occupational Pension is a program managed, and contributions made, by your employer, who might instead provide a low-cost Personal Pension plan. If you change employers, you may be able to transfer your old Company Pension into a Personal Pension, or join your new employer’s plan.