Home > Finance in the UK > Addressing The Pension Deficit-How To Finance Your Future

Addressing The Pension Deficit-How To Finance Your Future

By: J.A.J Aaronson - Updated: 20 Feb 2015 | comments*Discuss
 
Pension Deficit Stakeholder Serps

There has been much controversy in recent months over the pension deficit in the UK. The black hole facing pension schemes of the FTSE 350, the 350 largest public companies in the UK, is now equal to the total size of the South African economy. A huge number of people are now facing shortfalls in their company pensions and, as a result, will struggle through retirement.

Miss-sold pensions

Much of the chaos caused by the pension's crisis has been as a result of the mis-selling of stakeholder pension schemes. The detail is complex but, as a result of the extended public debate on the issue, it is hopeful that the same mistakes will not happen again. As a result, those who are just starting a pension are in a good position with regard to the information available to them.In its June 2010 Budget, the government confirmed that it would re-establish the link between the state pension and earnings. This will mean a sharp increase in pension payments, which will in turn be financed by a gradual raising of the retirement age.

Lack of confidence

Regardless of this new legislation, public confidence in the pension system has been knocked, and many people are choosing private schemes, rather than company employer-endorsed packages, to finance their future. Before doing this, however, it is a good idea to get an estimate of how large your state pension will be. To find this out, you can apply for a Pensions Forecast from the government. This forecast will tell you how much you have already earned towards your state pension, how large your pension will be if you continue to contribute at your current rate, and what steps you could take to improve your pension. The Forecast will also tell you how much you have contributed to your SERPS scheme, if you have one. This is the earnings-related part of your pension which may have been contracted out by your employer.

If you decide that you would like to start a private pension scheme in addition to your state pension entitlement, it is wise to start as early as possible. Many individual saver schemes allow you to put away as little as £25 per week, so they are a viable option for a large number of people.

Pension alternatives

There are, however, other options for those who wish to ensure they can finance their retirement. Pension schemes are only one solution; you may consider alternatives such as national savings. Bonds are a particularly good option for those who are not necessarily interested in accruing large amounts of interest, and would prefer the peace of mind of a virtually risk-free investment. A bond is basically a loan which you issue to the government. You are paid a small amount of interest on the loan, but you are also paid a bonus at the point of maturity. Bonds can be issued for varying lengths of time and, as such, can offer an attractive alternative (or complement) to a traditional pension scheme.

Above all, however, you should remember that the earlier you begin saving, and the more you put away, the larger your income will be in retirement.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
@meashamfox - you shouldn't be taxed. If your redundancy is tax free and you are earning under £5K for the year via your pension and you don't have any other income, then you are under the personal allowance for the year. That's how I see it, I don't know if anyone else has more advice?
Tim - 20-Feb-15 @ 12:32 PM
I have recently been made redundant, I am 63 years old 21/03/1951. I am eligible to claim my state pension on 21/03/2016 I will be taking my company pension which will be £414.00 approx monthly. and I will be receiving a tax free lump sum. I also received a redundancy payment of £11,390.90 which I will be using to live off alongside my company pension until March 2016. I have other savings in ISA's How much tax should I be expecting to pay and can they tax me on my savings. I will not be seeking any employment and I don't intend to claim any benefits Hope you can give me some advice Maurice
meashamfox - 19-Feb-15 @ 11:18 AM
Share Your Story, Join the Discussion or Seek Advice...
Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • Swissone
    Re: How Much Tax do I Have to Pay?
    Moved back to the U.K. Last November. My only income is a Swiss pension paid monthly, about £3000 at present exchange rate.…
    21 September 2017
  • Working mummy
    Re: How Much Tax do I Have to Pay?
    Hey, I've just been paid for my first month at work. I earned just over £1,700 and was taxed £146 and £123 NI. This seemed…
    20 September 2017
  • MoneyExpertise
    Re: A Guide to Unemployment Benefits
    Erbie - Your Question:Hi I'm starting my own business and I am still employed full time if I was to leave my current…
    19 September 2017
  • MoneyExpertise
    Re: How Much Tax do I Have to Pay?
    Mel - Your Question:I got a self assessment for April 2015 to April 2016 and I appear to not have paid any tax on the 2…
    19 September 2017
  • MaxL
    Re: How Much Tax do I Have to Pay?
    @harey2805 - it's swings and roundabouts. If she wants more take-home pay then self-employed means she will be able to fill in…
    18 September 2017
  • Mel
    Re: How Much Tax do I Have to Pay?
    I got a self assessment for April 2015 to April 2016 and I appear to not have paid any tax on the 2 employments I had over this…
    18 September 2017
  • Erbie
    Re: A Guide to Unemployment Benefits
    Hi I'm starting my own business and I am still employed full time if I was to leave my current employment to pursue my…
    16 September 2017
  • harey2805
    Re: How Much Tax do I Have to Pay?
    My wife (40) is working 2 days a week for £150 a day. She is also likely to be required for about 20 additional days throughout…
    16 September 2017
  • MoneyExpertise
    Re: A Guide to Unemployment Benefits
    Pat - Your Question:My hours are shortly to be cut to 16 (2 days) per week. I am 63, married and a home owner with no…
    15 September 2017
  • MoneyExpertise
    Re: How Much Tax do I Have to Pay?
    Leeh123 - Your Question:Hi I work seasonal so I do a lot of hours and through June, July and august I've been getting paid…
    15 September 2017
Further Reading...
Our Most Popular...
Add to my Yahoo!
Add to Google
Stumble this
Add to Twitter
Add To Facebook
RSS feed
You should seek independent professional advice before acting upon any information on the MoneyExpertise website. Please read our Disclaimer.