A guide to achieving Financial Independence
Contracting out of the Additional State Pension You can only contract out if your employer runs a contracted out pension scheme, so you’ll need to check this with them. If you’re a member of a contracted out occupational workplace pension you don’t contribute to the Additional State Pension for the time you belong to the scheme. This means that when you retire you either don’t receive any Additional State Pension or it might be reduced, depending on how long you contracted out.You and your employer pay lower National Insurance contributions while you contract out. When you retire, you’ll get a pension from your employer’s scheme. To contract out you must be: • earning at least the lower earnings limit of £5,564 a year (in 2012 to 2013) • paying Class 1 National Insurance (or treated as paying them - check with your employer) Different rules apply if you’re a member of a salary-related pension scheme before 6 April 1997.These rights, known as the ‘Guaranteed Minimum Pension’, can’t be taken before age 65 (men) or 60 (women).The Guaranteed Minimum Pension will continue to be paid at these ages even when the State Pension age rises.
A guide to achieving Financial Independence
There are a number of rules that can influence your retirement planning. To discover how we could help you save for your retirement and achieve financial independence please contact us for further information.
Last year, the National Association of Pension Funds (NAPF) announced that the lack of advice in this area might be costing half a million retirees each year as much as £1bn in future pension income.
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