Pensions: what do we all need to know about them?
The stage of our life when we stop working and enter the years of professional inactivity is defined as retirement or pension years. The pension age varies from country to country and between men and women.
In general terms, it is around age 65; however, some countries still keep it below (France), despite the general trend to increase the number of working years.
In the UK, the Pension age is 66 for both men and women and is set to increase to 67 between 2026 and 2028, to 68 between 2044 and 2046.
While this might seem like a long working life, the increase is understandable given the ageing population and the financial pressures on the State Pension system. However, it also means many may have fewer years to enjoy retirement — and potentially insufficient funds to maintain their desired and deserved lifestyle.
Let’s look at the types of pensions and see if we can increase the pension pot.
Pension types
1. The State Pension
A regular payment you can claim once you reach retirement age (currently 66).
To qualify for the full State Pension, you must have at least 35 qualifying years of National Insurance Contributions (NICs). A minimum of 10 qualifying years is required to receive any State Pension.
You can check your National Insurance record and forecast your State Pension via the UK Government website.
2. Workplace or Occupational Pension Schemes
A workplace pension is arranged by your employer. Most UK workers are automatically enrolled in one, although you can opt out.
Typical contribution rates are:
Employer: Minimum 3%
Employee: Minimum 5%
Total contribution: 8% of qualifying earnings value
The amount of the return on these pensions usually depends on the amount contributed, how they are invested, and their investment performance.
However, due to rising living costs and job market instability, some employees choose to opt out — potentially missing out on valuable employer contributions.
It’s worth noting that millions of pounds remain unclaimed in old workplace pension funds, often due to frequent job changes or lost contact details.
If you’ve had multiple employers, use the Pension Tracing Service to locate old pension pots. Financial providers such as Aviva, AJ Bell, and Hargreaves Lansdown also offer pension tracing services, which usually require at least 2 years of contributions.
Additionally, the UK government offers a pension tracking service. For more information, please check https://www.gov.uk/find-pension-contact-details
It’s worth noting that occupational pensions can be drawn from the age of 55.
3. Private Pensions
A private pension is a personal plan set up directly with a pension provider, giving you more control over contributions and investments.
Private pensions can be accessed from age 55 (rising to 57 in 2028). Up to 25% of your pension pot can be withdrawn tax-free, with the remainder subject to income tax.
These pensions are offered by various providers, and their returns depend on the amount invested and the performance of the stock market.
Continuing to contribute to your pension while working can also lower your taxable income, reducing your overall tax bill.
Beyond the untaxed amount, we can plan how we draw our money from the pension schemes with the help of the Financial Adviser (authorised by the FCA), so that we eliminate or reduce the tax liability that would apply to any amounts above the annual Personal Allowance threshold.
An experienced bookkeeper/accountant can also review your pension payouts and help you plan and ensure financial stability in later years.
Key Takeaways
The UK State Pension age is 66, rising in future years.
Build your pension pot through workplace and private contributions.
Track down lost pensions using the official tracing service.
Seek professional financial and bookkeeping advice to maximise returns and reduce tax.
Read more: How to Plan for Retirement as a Self-Employed Professional.
