Money & Pensions Service
Published: 21 June 2021
The Government’s Money and Pensions Service (MaPS) is supporting the Dorset Association of Parish and Town Councils. MaPS brings together three respected financial guidance bodies: The Money Advice Service, The Pensions Advisory Service and Pension Wise. MaPS is an arm’s-length body of Government sponsored by the Department for Work and Pensions, and also engages with HM Treasury on policy matters relating to financial capability, consumer protection and debt advice. Our role as a free and impartial service is to provide pensions guidance to support your council, parishioners and residents.
The State Pension is paid by the Government and is a secure income for life which increases by at least the rate of inflation each year. You build up your entitlement to the State Pension by making National Insurance contributions during your working life. In some cases, you can do this even when you are not working, such as when you are bringing up children or claiming certain benefits. For the current tax year 2021-22 the full new State Pension is £179.58 per week. However, you might be entitled to more than this if you have built up entitlement to ‘additional state pension’ under the old pre-April 2016 system – or less than this if you were ‘contracted out’ of the additional state pension.
See our guide on the State Pension
Defined benefit (DB) pension
You are most likely to have a defined benefit pension if you work in the public sector or for a large company. This is a salary-related pension which pays out a secure income for life and increases each year. The pension you get is based on how long you have been a part of the scheme and how much you earn. You might have a final salary scheme where your pension is based on your pay when you retire or leave the scheme, or alternatively a career-average scheme where your pension is based on the average of your pay while you were a member of the scheme.
Most defined benefit pension schemes have a normal retirement age of 65. If your scheme allows, you might be able to take your pension earlier, but this will reduce the pension you get quite considerably. When you take your pension you usually have the option of taking some of it as a tax-free cash sum. How much you can take will vary depending on your scheme rules, but often you can take roughly up to a quarter of the value of your pension benefits like this. Reducing the amount of tax-free cash, you take might increase the amount of income you receive.
It is possible to transfer your defined benefit pension to a defined contribution pension which would then allow you to access your pension more flexibly. However, consider this option very carefully as you might be giving up very valuable benefits. Before going ahead with a transfer from this type of scheme speak to a regulated financial adviser.
You can find Financial Conduct Authority (FCA) registered financial advisers who specialise in retirement planning in our retirement adviser directory.
Be careful, also, that the scheme you are transferring to is not a scam.
See our guide how to spot a pension scam.
If you have any questions around your DB pension then please contact The Pensions Advisory Service via;
The Pensions Advisory Service
Pensions helpline: 0800 011 3797
The Pensions Advisory Service provides expert, free, independent, and impartial guidance to members of UK pension schemes on pension and retirement saving issues.
We offer our services through a range of channels: free telephone helpline, webchat, digitally enabled virtual appointments and email.
Defined contribution (DC) pension
With this type of scheme, you build up a pension pot which you can draw an income from when you cut down or stop working. But you must be aged at least 55 before you can start to take money out. With this type of pension scheme, you can usually withdraw at least 25% of your pot tax-free.
The amount that builds up depends on:
~ the level of charges you pay
~ how well your investment performs, and
~ how much you and your employer pay into the scheme
Defined contribution (DC) pensions include workplace, personal and stakeholder pension schemes.
Once you reach 55 you are able to access your pension pot. However, the longer you leave your pot to continue building up, the more money you will have to live on in retirement. To understand the choices for using your pension pot, use Pension Wise – the free and impartial service backed by Government.
Appointment booking line: 0800 138 3944
Pension Wise offers a free appointment to anyone over the age of 50 with a defined contribution pension, where they can talk through the available options on claiming their pensions savings, what things to think about and how to avoid falling victim to a pension scam.