Changes Made to State Pension

Recently, there have been some changes made to the state pension that not everyone will know about. They are important, though, because they affect a lot of people and they can cause difficulties if they aren't addressed properly.

One of the biggest problems that most people see with the state pension is that it doesn't actually pay enough to live on. In addition, a man must pay into it for 44 years and a woman for 39 years before it takes effect, so people who have a sporadic work history or come to the working world a little bit late can't actually retire on the state pension. To help offset some of this, most companies offer pension plans as well, and people pay into them through deductions from their check every payday.

Money that's paid into these pension funds is free of taxes, and in 2006 changes were made to several areas of the pension fund that allowed people to add more to it. Much more can be invested each year, and the occupational pension can be drawn even while a person continues to work. The pension level will be raised to 55 instead of 50, but if your employer lets you retire at 50, you can still do so.

There are also other alternative types of pension plans that are going to be offered through many different employers, depending on the type of work that a company does and how many employees they have. If you're self-employed, however, you need to save into a personal pension plan so that you'll have something on which to retire. Twenty-five percent of your income can be taken as a tax free lump sum when you retire, and the rest has to be used to purchase a life income, such as an annuity.

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Written on behalf of Source IFA - Independent Pension Advice