Need for pension contribution

Introduction to Pension Contribution:

Generally, every worker in a stipulated public office is legally entitled to a take-home steepens given by the employer to the employee at retirement or the expiration of a working contract.

The amount you must contribute to the pension scheme is determined by the scheme’s rules. However, if you’re using the scheme for automatic enrolment there are minimum contributions you must pay.

The total contribution of 8% with at least 3% employer contribution is the basis and determinant of the amount to be received as pension.

Minimum contributions are smoothly injected over time. You will usually pay pension scheme contributions either as a fixed amount or based on a percentage of earnings

Provision by State

State pension currently consists of two components,

1. Basic state pension

2. The state earnings-related pension scheme

Basic state pension:

This is a type of state pension is dependent on the number of years one worked. Most individuals are entitled to basic state pension but the basic determinant is the years of work carried out.

National insurance contributions:

An individual that has paid a national insurance contribution for at least 95% of his or her working age is entitled to a single pension basic retirement pension.

Anyone that has been showing nonchalant attitudes or who has had breaks in his working career may not be paid full basic state pension, But he or she may get a portion of the full amount depending on the number of national insurance contributions contributed.

However, a married woman who has had several breaks or is absent in their working life may not be entitled to the full basic state pension in their own right. If this is the case they may have to rely on their spouse’s national insurance contribution records.

In line with the 80% rule above, when their husbands reach state pension, they will claim a married couple pension for both of them.

Proper up-to-date documentation should be made with the current rate of the single and the married couple’s state retirement pension.

The basic retirement pension {BRP} is available at state pension age, which has now been equalized at 65 for both men and women born after 5 march 1955. for women born before 6 April 1950, the state pension age is still 60.

State Earnings- Related pension scheme:

State earning-related pension schemes came into play in 19768 to overtake graduate pension schemes.

SERPS was set up by the social security Act 1975 and is available for employed people only.

Also, SERPS was available for those retiring before 2000 at a rate of 25% of average revalued middle-bad earnings. for people with more than 20years of contributions, the formula was applied to the average of the pension best 20years middle band earnings.

For those that will retire after 2000, a better beneficial formula applies. The aim was that from 2010, SERPS would be 20% of average revalued middle band earnings, but the reduction from 20% to 25% would take place over the ten years period, by 0.5% per year. However, the arranging period changed to an average of whole working life rather than best 20years.

All middle band earnings are revalued to state pension age in line with national average earnings of SERPS could not be managed and that alone has led to the provision of some alternatives.


A Pension contributory scheme is a scheme established to enhance employees’ enjoying the benefit of being paid their pension adequately and as when due upon retirement or exit of contract.

We also stated that one usually, pays pension scheme contributions either as a fixed amount or based on a percentage of earnings.

consideration should be taken that a state pension consists of Basic state pension and state earnings-related pension scheme.

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