Understanding Pensions: Let’s Chat About Your Retirement Options
Hi, I’m Felicia — your friendly pension expert. I hit financial freedom early thanks to smart moves with property, pensions, and the stock market.
Today, I want to break down pensions for you. Think of this like a relaxed coffee catch-up with your best mate. No jargon. No fluff. Just what you need to know to take charge of your future.
By the end, you’ll feel confident and ready to make your pension work harder for you.
1. The State Pension: Your Government-Backed Safety Net
Let’s start with the basics. This is like the government saying, “Hey, you’ve worked hard, here’s a little something for your retirement. To get the full amount, you need 35 years of National Insurance contributions.
- How much is it? Around £11,500 a year, rising to nearly £12,000 soon.
- Check your National Insurance record: You can do this online in minutes. Spot any gaps? You can fill them — and it might be worth it.
- Important deadline: You have until April 2025 to fill gaps going back to 2006. After that, you can only cover the past six years.
- Triple Lock: Your pension will rise by the highest of inflation, average wage growth, or 2.5%. It’s built to keep up with the cost of living.
2. Workplace Pensions: Free Money From Your Employer
Already employed? You’ve probably got a workplace pension. And yes, this could be the easiest way to build your retirement pot.
- How it works:
You pay in 4%, your employer adds 3%, and tax relief tops it up to 8% total. - Two types of pensions:
- Defined Benefit (Final Salary): Rare and generous. You’re guaranteed a set income based on your salary and how long you’ve worked.
- Defined Contribution: Most common. Your pot depends on how your investments perform — so there’s risk involved.
Pro tip:
Log in to your pension portal and check your investments. Many people leave their money in low-growth funds without realising. Switching to a better-performing fund could seriously grow your pot over time.
3. Private and Personal Pensions: Your DIY Retirement Plan
Self-employed? Freelancing? Want to top up your pension? Time to explore your personal options.
- SIPP (Self-Invested Personal Pension):
You choose where your money is invested. Platforms like AJ Bell or Vanguard offer a range of options. - SSAS (Small Self-Administered Scheme):
Ideal if you run a limited company. You can even lend money to your business or buy commercial property — as long as you follow HMRC’s rules.
Why Pensions Are a Tax-Saving Superpower
Pensions don’t just save for the future — they save you tax now.
- Your contributions are tax-free up to certain limits
- Your pension grows tax-free
- When you retire, you can take 25% of your pot tax-free
That’s a triple win.
My Pension Mistake (So You Don’t Make It)
Confession time. Even as a pension expert, I got lazy. I assumed my money was being managed well. But during lockdown, I checked and found my funds were underperforming. I switched to a global fund — and my pot tripled in five years.
Lesson? Don’t sleep on your pension. Log in. Check performance. Compare alternatives. A simple change can make a huge difference.
Final Thoughts: Take Control of Your Future
Your pension is like a garden. You can’t just plant and forget. It needs checking, pruning, and sometimes a complete refresh.
Start with one small step today:
- Check your State Pension record
- Log in to your workplace pension
- Research SIPP options if you’re self-employed
You’ve got this. And I’m here to help — drop a comment or question any time.
