Retirement Pension

By: EconomyWatch   Date: 6 October 2009

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Retirement pension is a saving plan for retirement. The sooner you begin to pay into a pension plan, the higher will be your retirement income. Old age pensions are not only considered a way of securing an income for retired life, they are also considered for tax saving purposes.

Types of Retirement Pension or Old Age Pension

There are many types of pension plans one can opt for.

State Pension: State Pension is a government-administered old age pension plan based on the National Insurance contributions a person makes. The contributions are calculated on the basis of the number of tax years, called the qualifying years, a person has made National Insurance contributions. In order to get the full basic state pension, a woman needs 39 qualifying years, while men need 44 qualifying years. The state pension age is 65 for men born on or before April 5, 1959. It is 60 for women born on or before April 5, 1950. If you are not eligible for full state pension and contributed at least 25% of the qualifying years, you will get a basic weekly state pension.

Company Retirement Pension: Employees set up company pensions or occupational pensions to provide retirement pension for their employees. Company pensions are broadly classified into salary related schemes and money purchase schemes. In a salary related scheme, the retirement pension depends upon the salary and the number of years a person contributed to the scheme. The old age pension in a money purchase scheme depends upon the amount paid into the scheme and how well the contributions have been invested. A company pension scheme is good for both the employers and the employees.

Personal Retirement Pension: A personal retirement pension plan allows a person to receive pension from the age of 50. Banks, building societies and insurance companies offer this type of pension.

The government contributes to most of the pension plans and offers tax relief to help people live a comfortable life after retirement. Moreover, the pension fund your contribution gets invested in will not attract capital gain taxes. Even if you do not pay tax, the government will contribute to your retirement pension plan. It is good idea to choose a retirement plan as early as possible.


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