If you are not sure what your pension schemes’ indexation is or what kind of pension you have, contact your pension provider or speak to your employer.
Your company’s HR should have information about your pension if you can’t find your paperwork.
What else is going on with pensions?
Pensions have been a hot topic over the past few years, with a number of reforms announced by the government.
The government announced a landmark pensions review last year that aimed to boost retirement income for millions of people by an average of £11,000, although this has been delayed.
There are also ongoing discussions around how a landmark court case last year could affect DB pension schemes, after it found Virgin Media had not got changes to its pension scheme signed off correctly.
Pensions are often the subject of administrative errors, too.
For example, the DWP is currently working through several state pension errors that have left retirees out of pocket.
One of those is the Home Responsibilities Protection (HRP) error.
HRP was a scheme to protect parents who were not able to earn and pay National Insurance because they were raising children.
And last week, it was revealed that thousands of NHS workers could miss out in retirement after a major blunder which meant they did not receive vital paperwork by the correct deadline.
What are the different types of pensions?
WE round-up the main types of pension and how they differ:
- Personal pension or self-invested personal pension (SIPP) – This is probably the most flexible type of pension as you can choose your own provider and how much you invest.
- Workplace pension – The Government has made it compulsory for employers to automatically enrol you in your workplace pension unless you opt out.
These so-called defined contribution (DC) pensions are usually chosen by your employer and you won’t be able to change it. Minimum contributions are 8%, with employees paying 5% (1% in tax relief) and employers contributing 3%. - Final salary pension – This is also a workplace pension but here, what you get in retirement is decided based on your salary, and you’ll be paid a set amount each year upon retiring. It’s often referred to as a gold-plated pension or a defined benefit (DB) pension. But they’re not typically offered by employers anymore.
- New state pension – This is what the state pays to those who reach state pension age after April 6 2016. The maximum payout is £203.85 a week and you’ll need 35 years of National Insurance contributions to get this. You also need at least ten years’ worth to qualify for anything at all.
- Basic state pension – If you reach the state pension age on or before April 2016, you’ll get the basic state pension. The full amount is £156.20 per week and you’ll need 30 years of National Insurance contributions to get this. If you have the basic state pension you may also get a top-up from what’s known as the additional or second state pension. Those who have built up National Insurance contributions under both the basic and new state pensions will get a combination of both schemes.