State Pensions - What You Need To Know About State Pensions

State Pensions were introduced in the UK in 1948 and are paid for by the working population's compulsory National Insurance contributions. The contributions that are paid in now are used to fund the state pensions being paid out now. So when you come to retire your state pension will be paid by the taxpayers of the future. The government spends a huge amount on pensions, around 100 billion pounds a year which is even more than it spends on the National Health Service at 79 billion pounds a year. The problem with the way the state pension works is that it relies on there being a good ratio of workers to pensioners in order to keep paying out the state pension and the problem is that the number of pensioners is increasing due to longer life expectancy and the baby boom generation born after the second world war. The consequence is that it is not a good idea to rely on the state pension alone for your retirement, you should make some other pension arrangements as well like a personal pension plan.

The government has introduced the Minimum Income Guarantee (MIG) which is a form of income support for pensioners and is what the government say that pensioners should be living on as a minimum. The Minimum Income Guaranteed (MIG) is slightly different to income support in two ways:

1. The government intends to keep increasing the minimum income guarantee (MIG) in line with earnings, unlike normal income support which normally increaes with inflation.

2. The limits on the amount of savings you can have and still be able to claim support is higher for pensioners on the Minimum Income Gurantee (MIG) than it is if you are on normal income support.