Many people think that they can solely rely on the state pension as income, for when they retire. Those people will be in for a big shock! Overall, the UK state pension is in trouble, as with most state pensions around the world, and is slowly being eroded. By the time it is time for you to retire, there may be little or nothing left to pay out.
For state pensions, it is also important to keep in mind that you actually have to qualify for it. You will have to have made a minimum level of National Insurance (NI) contributions throughout your working life to qualify. It is possible to get a state pension forecast from the Department of Social Security, to see if you are up to date with your NI contributions. If you are not up to date, it is possible to top it up, to keep it current.
It is estimate that the current basic state pension on average is worth roughly £77.45 per week or £4,000 a year. This is not much to maintain your standard of living, when you retire. That is why the government gives tax incentives for people to contribute to private pension schemes on a tax-free basis.
However, it may be more relevant to look at the Pension Credit, which replaced the Minimum Income Guarantee in the UK in October 2003. The Pension Credit sets a minimum that the State will give you when you reach retirement age. This minimum is a little above the basic state pension. Currently, the Pension Credit ensures that you will get a minimum of £102.10 as a single person and £155.80 as a couple. However, there are some limits. For example, if you have £6,000 or more in savings, your benefit will be reduced.
Either way, both these schemes do not amount to much money and it is important for you to consider joining a company pension scheme or set up your own individual pension scheme.