The mainstay of government pension provision is currently the basic State Pension, funded by National Insurance Contributions, and alongside that, the pension credit scheme, which is a ‘top-up’ payment to the State Pension.
From 2012, the government will take an initiative in pensions provision to company employees, known as the Personal Account.
Here are the questions to be asked regarding the government’s provisions for retirement planning.
Evaluate what the Personal Account will provide
The government has declared that in 2012 it will introduce Personal Accounts, a pension scheme aimed at those who have neither a personal pension scheme nor a company pension scheme. Those with neither of these types of retirement provision in place will be enrolled automatically in the scheme (‘auto-enrolled’) . However, since the scheme will be state-run, some experts have predicted that the priority will be keeping running costs to a minimum. This could limit the freedom of the managers of the cash to utilise all the investment options available to them.  Consequently, it has been speculated that the scheme may deliver only mediocre returns to members.
Be alert to the current availability of tax relief on pensions contributions
The government currently provides tax relief on contributions to your company or personal pension. According to current thinking, tax relief would also be available by year three of the Personal Account Scheme (i.e. in 2015) as follows: the employee would contribute 4% of his salary, the employer’s contribution would equal 3% of the employee’s salary, and the government contribution would equal 1% of the employee’s salary.
Be aware of what the basic State Pension provides
The basic State Pension is currently set at the (not so) princely sum of £95.25 per week, or £4,953 per year.
Avail of the chance to fill in ‘missing years’ of NI contributions
If you are reaching or have reached pension age between April 2008 and April 2015, and already have 20 years of NI contributions, it is now possible to fill in gaps in your NI record for years you missed since 1975. You can ‘buy back’ up to 6 years right away by making voluntary contributions. This option remains open to you for six years from your date of retirement.
Check if you will qualify for Pension Credit
If you have no savings or other income besides the basic State Pension, you may be entitled to Pension Credit. This is a supplement to the State Pension which ‘tops up’ the above figures, but is means-tested and is not available to those who have financial resources of their own, such as bank or building society savings.
