Finance

Week 5
Pensions
 A pension is a specific type of long-
term savings plan that you build up to
fund your retirement
(when there are no earnings).
What are the two main types
of pension?
State pension and workplace pension
 The State Pension
Paid by the government.
You must have paid national insurance to qualify –
more years = high pension.
To qualify for the full state pension you must have
paid national insurance for 35 years.
This would mean you would receive £165 per week
from your state retirement age (68 for most people).
 Workplace Pensions
These are set up by the employer.
You will pay a percentage of your monthly income into the pension.
Your pension contribution is tax free (it is taken off your gross pay
before tax is paid).
The major benefit is that your employer will also pay into this pension
pot for you.
The rules changed in 2018 – all employees over 22 and earning over
£10,000 per year will automatically be entered into a workplace
pension.
 Case Study
The average pensioner in the UK needs a minimum
annual income of approximately £10,850 in order to cover
basic living costs.
What costs do you think the average pensioner will have?
Can you name 10 different costs?
 Do you agree with these figures?
Using the information above and what you know about the size of the state
pension, what advice would you give to someone planning for their retirement?