Are You Planning to Retire in 2011

Are You Planning to Retire in 2011

by Ian Youngman on 24 Jan, 2011

If you are planning to retire during 2011, there are several important things you need to do in advance to make sure you get the State Pension and all benefits you are entitled to.

Four months before you reach State Pension age, you should get a letter from The Pension Service. This personalised letter outlines the choices you have about when to claim your State Pension and inviting you to claim it.

You must contact your Tax Office to make sure you get any increased tax allowances you qualify for. This will ensure you receive the right tax-free allowances, pay the right amount of tax, and stop paying National Insurance contributions. State Pension is paid to you without any tax taken off, while other pensions are normally taxed before you receive them.

There are many extra benefits available to the retired. You paid enough out during your working life, so getting maximum benefit in retirement is a right you have earned, not a handout or admission of weakness. If you were born on or before 5 July 1950, you could be entitled to a Winter Fuel Payment for winter 2010/11;in most cases this is paid automatically. If you are on a low income you can apply for Pension Credit that guarantees a minimum weekly income of £132.60 if you are single and £202.40 if you have a partner. Depending on your circumstances, you may be entitled to other benefits when you retire, such as Housing Benefit and Council Tax Benefit.

Most people have either a personal or company pension as well as the state one. Insurance company Prudential has revealed the results of its Class of 2011 study, which investigates how much pension money this year’s retirees will have to live off. The average person retiring this year expects to have an estimated total annual income of £16,559 including any private pensions and State Pension. One in five of 2011’s new pensioners expect to live on less than £10,000 a year. The average age of those expecting to retire in 2011 is 60, but one in five of this year’s expected retirees will do so below the age of 55.

You may want to, or for health reasons, have to, stop working completely. But the transition from working full time to a life of leisure can be traumatic. Many people choose to keep on working while taking a State Pension entitlement. If you are lucky enough not to need extra income, working as a volunteer can be extremely rewarding after you retire. An increasing number of charities, hospitals and organizations such as the National Trust rely heavily on volunteers to keep going.

If you choose to work part-time, income you receive from part-time work in retirement counts as taxable income – along with income from your State Pension, personal or company pensions and from certain taxable benefits. The good news is that your tax-free personal allowance is more generous once you reach retirement age, which means you can earn more before having to pay tax.

About the Author

Ian Youngman

Ian Youngman is a writer and researcher specialising in insurance, healthcare and medical tourism. Formerly at management level in the insurance and banking industries, he was a co-founder of The General Insurance Market Research Association.