Reader's query
I don't understand the relationship between state and private pensions. Does the state pension take into account my income from a private pension and reduce the its pension accordingly, or will the statement remain unaffected by any additional pension income?
MC/London
Expert's advice
Francis Klonowski
Principal of Klonowski & Co in Leeds. Financial Planner of the Year 2004 & 2006
The
basic state pension is not affected by private pensions, no matter what their size. Thankfully, it's not means-tested. However, some final salary (or defined benefit) schemes reduce their benefits by the equivalent of the basic state pension from age 65. This will be stated in the members' booklet and will be reflected in the values shown on the scheme's annual benefit statements.
Also, for anyone who has contracted out of the state second pension (SP2) or its predecessor, the state earnings related pension scheme (Serps), their entitlement will be reduced in respect of those years when a National Insurance contribution rebate was paid into their plan. This shows on the final pension statement - sent just before you reach 65 - as the full SERPS/SP2 entitlement less the reduced sum.
