The Peoples Pension: What is it and How Does it Work?
Updated: Aug 21, 2022
As opposed to traditional pension plans, which are only available to people who work in the public sector or at large corporations, the people’s pension plan (PPP) gives everyone in the UK access to their own individual personal pension fund that they can contribute to throughout their working lives and then draw from once they retire.
But what exactly is the PPP, how does it work, and why should you consider enrolling in one? Read on for everything you need to know about this innovative type of pension plan!
How do I get started?
The first step is to set up an account with the People's Pension. You can do this by visiting their website or by contacting their customer service team. Once you have an account, you will need to make regular contributions.
The amount you contribute will depend on how much you want to save for retirement. You can start with as little as £20 per week.
The People's Pension offers a variety of investment options, so you can choose how your money is invested. You can also choose how much risk you are willing to take on.
The higher the risk, the higher the potential return, but also the greater the chance of losing money. You can change your investment choices at any time, and you can take your money out when you retire.
Can I join if I am under 25 years old
The Peoples Pension is a new type of pension that allows people to join if they are under 25 years old. This pension is designed to help young people save for retirement, and it works by allowing them to save for retirement by personal contributions and tax rebate top ups from the government.
The amount that you can claim depends on how much you have saved up, but you can start claiming an income as soon as you reach the age of 55 if you want. But more usually, you will receive monthly payments from the day you turn 65 until your death or your pension pot runs dry.
You do not need to work in order to qualify for this pension, and you will only be able to get one of these pensions per person.
Can I claim my own State Pension early?
The State Pension is a regular payment from the government that you can claim when you reach State Pension age. You can choose to claim your State Pension early, but you will get less money each week.
The amount you get depends on how many qualifying years of National Insurance contributions you have. You can check your National Insurance record online to find out how many qualifying years you have.
If you are thinking about claiming your State Pension early, you should speak to a financial advisor to find out if it is the right decision for you. They can help you work out whether you would be better off waiting until you reach State Pension age, or getting your pension sooner.
They may also be able to advise on other ways of accessing some retirement income before then – such as accessing the cash in an Individual Savings Account (ISA) earlier than expected.
Do I need to make National Insurance contributions?
You need to make National Insurance contributions if you’re an employee and you earn above a certain amount. If you’re self-employed, you need to make National Insurance contributions if you earn above a certain amount.
The amount you need to earn before making National Insurance contributions depends on your age. You stop making National Insurance contributions when you reach State Pension age. Once you retire, this will depend on the type of pension scheme you have been paying into.
If you're in a defined contribution scheme (most people), then from that point onwards all the money from your investments go towards funding your retirement income.
Defined benefit schemes are different - the company pays for them - so when you retire the company decides how much of your final salary they'll pay out as an annual pension income for life.
Is there any age limit to claim my State Pension online?
You can claim your State Pension online when you reach State Pension age. You can also defer your State Pension if you want to. If you defer your State Pension, you’ll get a higher weekly payment when you do start to receive it.
You can choose to have your State Pension paid into a bank or building society account, or have it paid directly to you.
The website will give you the option of setting up an automatic monthly payment plan for receiving your State Pension from now on. You can also choose to be automatically enrolled in one of the two pensions schemes if you are not already enrolled in either the ‘State Second Pension Scheme’ or ‘Personal (Contributory) Pension Scheme'.
If you are between 55 and 75 years old, you should be automatically enrolled in one of these pension schemes by law but may be able to opt out at any time.
If this doesn't answer all of your questions about claiming the State Pension online, click here for more information on what type of pension scheme suits your needs.
How much will my benefits be when I get older ?
Your benefits as a member of the Peoples Pension will depend on how much you contribute during your working years, as well as how long you contribute and how well your investments perform.
For example, if you start contributing at age 25 and continue until age 65, you will receive a much bigger pension income than someone who starts contributing at age 50. So start saving as soon as you can.
When can I start drawing on my Peoples Pension fund ?
You can start drawing on your peoples pension fund as soon as you reach the age of 55, soon to be 57. If you're not yet 55, you can still access your pension fund in very limited circumstances , such as very ill health.
With a retirement annuity, you'll start receiving payments immediately, but they'll be smaller than if you wait until you're 60 or 65.
The earlier you start drawing on your pension fund, the less time it will last. So if you want your pension to last through your retirement, it's best to wait until you're at least 60 before starting to draw on it.