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Consumer  >  Why have a pension?  >  Why have a pension?

Why have a pension?

Retirement should be a time for enjoying life to the full. People are living longer, are healthier and more active in their old age, and generally expect more from their retirement. However, many people don't realise that unless they start saving for a pension as early as possible, they may not be as comfortable in retirement as they had hoped.

The State provides some income to those that are retired, but this really only provides a safety net to ensure all pensioners have at least a minimum standard of living in retirement and is not enough for most to live on comfortably. For example, the Basic State Pension is currently £90.70 a week for a single person (2008/2009 tax year).

Could you survive on this amount of money?

Whilst many of us dream of moving to sunnier climates or buying a new sports car when we stop working, the reality is that most people will need to save a significant amount just to maintain their existing standard of living in retirement.

A pension is one of the most popular and tax efficient ways of saving for retirement. Any payments you make to a pension receive tax relief at the highest rate of tax you pay, and when you come to retire you will usually be able to take a tax-free lump sum as well as a regular income for the rest of your life.

The rest of this section explains why pensions are an important part of retirement planning.

• What does the State provide?
• Can I rely on State benefits alone?
• What types of pension are there?
• What's the impact of an ageing population?
• How much will I need in retirement?
• When should I start saving?
• What differences are there for women?

We've also produced a leafletdispelling some of the most common misconceptions people have about pensions.

References to taxation are based on our understanding of current taxation law and practice and may be affected by changes in legislation or by an individual's particular circumstances.