As part of your financial settlement, you might have received part of your ex-husband, wife or civil partner’s pensions. Or perhaps you’ve given up a share of yours. Whatever your situation, and when you can afford to, it’s important to start or to build up your retirement savings.
Work out how much you need to live on when you retire
Start by working out how much you’d need to live on when you retire, and how much you’d like to have.
That will help you decide what you need to do.
When you retire, some of your living costs might be lower than when you’re working, while others – such as fuel bills – might be higher.
The amount you need when you retire will depend on a range of factors.
These might include whether you have to pay your rent or mortgage, your lifestyle and what you’d like to do when you retire.
Check our Pension calculator
You can get an estimate of the income you'll get when you retire with our Pension calculator.
Decide what to do with your pension settlement
You might have received:
- a share of your ex-partner’s pension, which you have to pay into a pension plan for your retirement, or
- membership of your ex-partner’s pension scheme (you become a ‘pension credit’ member).
Not all pension schemes will let ex-partners (husbands, wives or civil partners) join. If that’s the case, you’ll have to decide where to invest your pension settlement.
It’s best to get expert advice as soon as you can.
See our guide Choosing a financial adviser
Need more information on pensions?
Call our helpline free on 0800 011 3797 or use our webchat. One of our pension specialists will be happy to answer your questions.
Our help is impartial and free to use, whether that’s online or over the phone.
Opening times: Monday to Friday, 9am to 5pm. Closed on bank holidays.
Put as much money as you can afford into your pension
Whether you already have a pension or not, it’s important to think about how you’ll live when you retire.
Without your own pension or other retirement income, you might have to rely on just your State Pension.
Here’s what you can do:
- work out how much you can afford to pay every month
- make a budget to find out how much you have left each month
- find out if you can join your workplace pension scheme. If you’re employed, and are between 22 and State Pension age, and earn more than £10,000 a year, it’s likely that you’ll be enrolled into your workplace pension scheme. This means that you’ll be getting a contribution from your employer.
Find out more in our guides:
Budget planner
To help you manage your money, try our free and easy-to-use Budget planner.
Alternatives to pensions
If you don’t want to save towards your retirement in a pension, or you want more flexibility, there are other options.
If you prefer, you can use an ISA (Individual Savings Account) or another investment plan as well as, or instead of, a pension.
There are pros and cons to each.
ISA - Pros
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You can potentially access money in an ISA at any age (though there may be penalties in some cases).
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You don’t have to pay tax on money you take out of an ISA or when you cash it in.
ISA - Cons
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You don’t get tax relief on money you pay in.
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The fact you can take out your money whenever you want might be a disadvantage if you’re not disciplined.
Find out more in our guides:
Pensions – Pros
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You get tax relief on money you pay into a pension. In simple terms, tax relief is money that would have gone to the Government as tax but which goes into your pension instead. It means that every £100 you pay in only costs you £80 if you’re a basic rate taxpayer. Less if you pay tax at a higher rate.
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If you’re in a workplace pension, your employer usually contributes too.
Pensions – Cons
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You have to wait until you’re 55 before you can take money out of your pension.
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You have to pay tax on most of the money you take out of a pension. You’re normally allowed to withdraw up to 25% tax-free, but you might have to pay tax on the rest.
Building up your State Pension
If you've yet to reach or are approaching State Pension age today, to get the full State Pension you'll need to have paid or been credited with 35 years of qualifying contributions or credits on your National Insurance record.
To receive any State Pension at all, you’ll need to have made or been credited with at least 10 years of qualifying contributions.
The quickest way you can check how much you might receive by getting a State Pension forecastOpens in a new window is online at GOV.UK.
If you have gaps and might not get the full state pension based on your current record, there are things you can do to fill those gaps.
Find out more in our guide State Pension: how it works
If you’re divorced or your civil partnership has been dissolved, you might have been given some of your ex-partner’s State Pension as part of the financial settlement.
You might also be able to claim a basic State Pension on your ex-partner’s National Insurance (NI) record if it’s better than your own.
The rules state that:
- you can substitute your ex-partner’s NI record instead of your own, for the years you were married or in a civil partnership, until you divorced or dissolved your civil partnership
- you can’t get a State Pension based on your ex-partner’s NI record if you remarry or enter a new civil partnership before you reach State Pension age
- you can’t get a State Pension based on your ex-partner’s NI record if you reach State Pension age on or after 6 April 2016. That’s when the flat-rate State Pension was introduced. The only exception will be for women who paid the reduced rate NI (married women’s stamp) at any time in the past 35 years.
