The company I worked for recently moved over to a new HR system which sneakily reminds you every time you log on of your possible retirement date. I was shocked to see that I had forty years still left to work and yet everyone constantly talks about how important it is to start saving for your retirement as soon as possible.

The Basic State Pension

Currently the government administer a pension scheme that takes a percentage of your income through National Insurance. When you reach the national retirement age you are entitled to a set amount per week until you die providing that you have built up enough qualifying years by paying a minimum amount of NI contributions in a year period.

The basic state pension is not means tested instead the amount you are eligible to receive is almost solely determined by how much NI you have paid. If you find you are falling short of qualifying years you can make small additional NI payments that ensure you will qualify when you reach retirement age. HMRC will send you an annual statement detailing if you are below the threshold for qualifying years well in advance of your retirement age. To qualify for the full state pension from April 2010 both men and women need 30 qualifying years.

The government has the power to set the retirement age and has gradually increased in the past. Currently the retirement age for women is 60 and for men 65 but it is expected that the age will rise to a minimum of 68 for both sexes within the next 10 years.

If you happen to fall into the full time parent or unable to work category you need not worry as you may be eligible for National Insurance Credits which will count as a qualifying year. To be eligible for this it is likely you will have been on benefits such as Jobseeker’s allowance, Incapacity benefits, Carer’s Allowance / Income Support or receiving Child benefits

The amount of pension you will receive changes each year in line with inflation, currently pensioners receive on average just under £98 per week. This totals only £5096 per annum so many people are required to work past their retirement age or look into other methods of saving.

Many companies offer their employees private pension schemes which range from ones that are means tested on your final salary to a return on a percentage of your wages invested each year. If you have a little extra cash each month then joining one of these schemes will ensure that you have a happy money worry free retirement.