As you plan for your retirement, understanding the intricacies of the pension and benefits system in the UK is crucial. The UK offers a comprehensive range of benefits and pensions, ensuring that citizens have financial security throughout their lives. From state pensions to private pension plans, there are various options available to individuals, each with its own set of advantages.
One of the most important benefits in the UK is the state pension. This pension provides a regular income for individuals who have reached the state pension age. The amount of the state pension is based on an individual’s National Insurance contributions throughout their working life. Those who have made sufficient contributions will receive the full state pension, while those who have not may receive a reduced amount or no state pension at all.
In addition to the state pension, individuals in the UK can also contribute to private pension plans. Private pensions are typically offered by employers or can be set up independently. These pensions allow individuals to save for their retirement through regular contributions or lump sum payments. Private pension plans often offer tax advantages and can provide a significant source of income during retirement.
It is important to note that the pension and benefits system in the UK is complex and subject to change. It is advisable to seek professional advice when planning for your pension and benefits to ensure that you are making the most of the available options. By understanding the various benefits and pensions available, you can take control of your financial future and enjoy a comfortable retirement.
State Pension in the UK
The State Pension in the UK is a benefit that provides a regular income to people of State Pension age. It is intended to help individuals maintain a basic standard of living in retirement.
To be eligible for the State Pension, you must have paid National Insurance contributions during your working life. The amount of State Pension you receive will depend on your National Insurance record and the number of qualifying years you have accumulated.
Qualifying Years
A qualifying year is a tax year in which you have paid or been credited with enough National Insurance contributions to count towards your State Pension.
In general, you will need at least 10 qualifying years to be eligible for any State Pension and 35 qualifying years to receive the full amount. If you have less than 10 qualifying years, you may still be able to receive a reduced State Pension.
Full State Pension
The full State Pension in the UK is currently £175.20 per week (as of April 2021). To qualify for the full amount, you will need to have 35 qualifying years on your National Insurance record.
If you have fewer than 35 qualifying years, your State Pension will be reduced on a pro-rata basis. For example, if you have 20 qualifying years, you will receive 20/35ths of the full State Pension.
It is important to note that the State Pension age is not fixed and is subject to change. The UK government has been gradually increasing the State Pension age to account for longer life expectancies.
Individuals can check their State Pension forecast online to see how much they are likely to receive and when they will become eligible. The forecast takes into account their National Insurance record up until the start of the current tax year.
Additional Pension Options
While the State Pension provides a basic income in retirement, it may not be enough for some individuals to maintain their desired lifestyle. Therefore, it is advisable to consider additional pension options such as workplace pensions, personal pensions, and other savings and investment vehicles.
These additional pension options can help individuals build up a larger retirement fund and provide a more comfortable retirement income in addition to the State Pension.
Overall, the State Pension in the UK is an important benefit that helps individuals secure a basic income in retirement. However, it is also crucial for individuals to consider additional pension options to ensure a more financially secure future.
Occupational Pension Schemes
An occupational pension scheme is a form of retirement plan that is set up by an employer for the benefit of its employees. It is a way for employees to save for their retirement and receive financial support once they reach the retirement age.
In the UK, there are two main types of occupational pension schemes: defined benefit (DB) schemes and defined contribution (DC) schemes.
Defined Benefit (DB) Schemes
A defined benefit scheme is also known as a final salary scheme. In this type of scheme, the amount of pension you receive is based on your salary and the number of years you have been a member of the scheme. The employer is responsible for providing the agreed-upon benefits, regardless of the investment performance of the scheme.
This type of pension scheme provides a guaranteed income for life, which is often inflation-linked. However, DB schemes are becoming less common in the UK due to their high cost and financial risks for employers.
Defined Contribution (DC) Schemes
A defined contribution scheme is also known as a money purchase scheme. In this type of scheme, both the employer and the employee contribute to a pension pot. The final pension amount depends on the amount of money contributed, the investment performance, and the annuity rates available at retirement.
DC schemes offer more flexibility than DB schemes, as members have more control over the investment choices and can access the pension savings as a lump sum or choose an income drawdown option. However, the final pension amount is not guaranteed and depends on various factors.
It is important to understand the differences between these schemes and consider your own financial goals and priorities before choosing a pension scheme. Consulting with a financial advisor can help you make an informed decision and ensure you are taking full advantage of the pension options available to you in the UK.
Personal Pensions and Self-Invested Personal Pensions (SIPPs)
In the UK, personal pensions and self-invested personal pensions (SIPPs) are popular options for individuals looking to save for their retirement.
A personal pension is a type of pension plan that individuals can set up themselves. It allows them to make regular contributions that are invested on their behalf, with the goal of building up a retirement fund over time.
SIPPs, on the other hand, offer individuals even more control over their pension investments. With a SIPP, individuals have the freedom to choose from a wide range of investment options, including stocks, bonds, and commercial property. This allows them to tailor their investment strategy to their own risk tolerance and financial goals.
Both personal pensions and SIPPs offer tax advantages. Contributions to these pension plans are typically tax-deductible, meaning individuals can reduce their taxable income by the amount they contribute. Additionally, any investment growth within the pension fund is tax-free.
| Personal Pensions | SIPPs |
|---|---|
| Individuals can set up a personal pension on their own. | SIPPs offer individuals more control over their investments. |
| Investment options are limited to those offered by the pension provider. | Individuals can choose from a wide range of investment options. |
| Tax advantages include tax-deductible contributions and tax-free investment growth. | Same tax advantages as personal pensions. |
It’s important to note that while personal pensions and SIPPs offer flexibility and tax advantages, there are also potential risks involved. The value of investments can go up or down, and individuals may not get back the full amount they invested.
Before making any decisions about personal pensions or SIPPs, it’s recommended to seek professional financial advice to ensure it aligns with your individual circumstances and goals.
Defined Benefit and Defined Contribution Pension Schemes
When it comes to pensions and benefits, there are two main types of pension schemes in the UK: defined benefit (DB) and defined contribution (DC) pension schemes.
In a defined benefit pension scheme, the retirement benefits are based on a formula that takes into account factors such as the employee’s salary and years of service. This means that the amount of pension you will receive is predetermined and guaranteed, regardless of investment performance. The employer is responsible for funding the scheme and managing the investment risks.
On the other hand, in a defined contribution pension scheme, the retirement benefits are based on the amount of contributions made and the investment performance. The employee and employer contribute to the scheme, and the money is invested in various assets, such as stocks and bonds. The final pension amount will depend on the investment returns and the choices made by the individual.
Defined Benefit Pension Scheme
A defined benefit pension scheme provides a secure and stable income in retirement. The amount of pension you will receive is usually a percentage of your final or average salary multiplied by the number of years of service. This type of scheme is typically offered by large corporations and public sector employers.
One of the advantages of a defined benefit pension scheme is that the employer assumes the investment risk. This means that no matter how the investments perform, you will still receive the agreed-upon pension amount. However, it is worth noting that the employer may change the terms of the scheme in the future, such as increasing the retirement age or reducing the benefits.
Defined Contribution Pension Scheme
A defined contribution pension scheme is based on individual contributions and investment performance. The employee and employer make regular contributions to a pension pot, and the money is invested in various funds. The final pension amount will depend on the contributions made and the investment returns achieved.
One of the advantages of a defined contribution pension scheme is that individuals have more control over their pension savings. They can choose how much to contribute and how the money is invested. However, this also means that individuals bear the investment risk, and the final pension amount is uncertain. It is important to regularly review and adjust the investment strategy to ensure that the pension pot is on track to meet retirement goals.
Pension Tax Relief
In the UK, individuals are entitled to receive tax relief on their pension contributions. This is an incentive provided by the government to encourage people to save for their retirement.
There are different types of pension tax relief available, depending on the individual’s circumstances. The most common types include:
1. Basic Rate Tax Relief
Under this scheme, individuals receive tax relief at the basic rate of 20%. This means that for every £100 contributed to a pension, the government adds an extra £25, making the total contribution £125. However, higher and additional rate taxpayers can claim further tax relief through their self-assessment tax return.
2. Higher Rate and Additional Rate Tax Relief
Higher rate and additional rate taxpayers can claim additional tax relief on their pension contributions. For higher rate taxpayers, the additional relief is 20%, while for additional rate taxpayers, it is 25%. This means that for every £100 contributed, higher rate taxpayers can claim an extra £25, and additional rate taxpayers can claim an extra £31.25.
It is important to note that there is a maximum annual allowance for pension contributions. Currently, it stands at £40,000, although this may be reduced for high earners. Additionally, there is a lifetime allowance, which is the maximum amount that can be built up in a pension without incurring additional tax charges.
In conclusion, pension tax relief is a valuable benefit provided by the UK government to encourage individuals to save for their retirement. By taking advantage of this relief, individuals can make their pension contributions go further and ultimately secure a more comfortable retirement.
Automatic Enrollment and Workplace Pensions
Automatic enrollment is a system in the UK that requires employers to automatically enroll their eligible workers into a workplace pension scheme. This scheme helps employees save for their retirement and provides them with a source of income in addition to the state pension.
Under automatic enrollment, both employers and employees contribute to the pension scheme. The minimum contribution percentages are set by the government and are reviewed periodically. Currently, the minimum contribution is set at 8% of the employee’s qualifying earnings, with at least 3% coming from the employer.
This system is designed to encourage more people to save for retirement and to ease the burden on the state pension system. It ensures that employees are actively saving for their future and helps them build a sizable pension pot over time.
Employers are responsible for enrolling their eligible workers into a workplace pension scheme and must provide information and guidance about the scheme. They also have obligations to monitor, manage, and contribute to the scheme on behalf of their employees.
Employees have the right to opt out of the scheme if they choose, but they will lose out on the employer contributions and the tax benefits associated with the scheme. It is generally recommended that employees stay enrolled in the scheme to take advantage of these benefits and ensure a more secure financial future.
Overall, automatic enrollment has proven to be a successful way to increase pension savings and improve retirement prospects for workers in the UK. It provides a simple and effective method for individuals to start saving for their future and reduces the reliance on the state pension.
Pension Transfers and Consolidation
When it comes to your pension, it’s important to consider whether transferring or consolidating your funds can benefit you in the long run. Pension transfers and consolidation can offer several advantages, including increased control over your retirement savings and potentially lower fees.
Why Consider a Pension Transfer?
There are various reasons why you might consider transferring your pension. If you have multiple pension plans from previous employers, consolidating them into a single plan can simplify your financial management and make it easier to keep track of your savings.
Transferring your pension can also give you more control over how your funds are invested. If you’re not satisfied with the performance of your current pension provider, transferring to a different provider with better investment options may be a wise choice.
Additionally, some pension plans come with high fees and charges, which can eat into your savings over time. By transferring to a plan with lower fees, you can potentially save more money for your retirement.
Things to Consider Before Transferring
Before making a decision about transferring your pension, it’s important to consider a few key factors. Firstly, you should review the terms and conditions of your current pension plans to determine whether transferring is allowed and if any penalties or fees will be incurred.
You should also consider the investment options available in the new pension plan and assess whether they align with your financial goals and risk tolerance. It’s worth seeking professional financial advice to ensure you make an informed decision.
Lastly, it’s crucial to compare the fees and charges associated with both your current pension plans and the new plan you’re considering. While lower fees may seem enticing, make sure you understand all the costs involved to avoid any unexpected surprises.
Overall, pension transfers and consolidation can be a beneficial strategy to optimize your retirement savings. However, it’s essential to thoroughly research and understand all the implications before making any decisions.
Remember: Consult with a financial advisor or pension specialist to get personalized advice based on your individual circumstances.
Pension Drawdown and Annuities
When it comes to retirement benefits in the UK, pension drawdown and annuities are two popular options to consider. Understanding how these options work can help you make informed decisions about your pension.
Pension Drawdown
Pension drawdown allows you to keep your pension fund invested while you draw an income from it. Instead of purchasing an annuity, you have more control over how your retirement savings are invested and how you withdraw money.
With pension drawdown, you can choose how much income to take each year within legal limits. You can also vary the income to suit your changing needs. This flexibility allows you to adjust your income as required, but it also means that your income is not guaranteed for life.
It’s important to carefully manage your investments to ensure your pension fund lasts throughout your retirement. You’ll need to consider your risk tolerance, investment strategy, and keep an eye on the performance of your investments.
Annuities
Annuities, on the other hand, provide a guaranteed income for life, or for a fixed term if you choose this option. When you purchase an annuity, you exchange your pension pot for an income stream provided by an insurance company.
The amount of income you receive from an annuity depends on various factors including your age, health, the size of your pension fund, and prevailing annuity rates. Once you’ve purchased an annuity, you cannot change your mind or access your pension savings in a lump sum.
Annuities provide certainty and security, as you know the amount of income you will receive throughout your retirement. However, they can be less flexible compared to pension drawdown.
| Pension Drawdown | Annuities |
|---|---|
| More control over investment and withdrawal decisions | Guaranteed income for life or fixed term |
| Flexibility to adjust income as needed | Certainty and security of a set income |
| No guarantee of income lasting for life | Lack of flexibility to access pension savings |
Choosing between pension drawdown and annuities depends on your individual circumstances, financial goals, and personal preferences. It’s advisable to seek professional financial advice to determine the best option for you.
Pension Scams and Fraud Prevention
When it comes to your pension benefits in the UK, it is important to be aware of the potential risks of scams and fraud. Pension scams can be devastating, resulting in a loss of your hard-earned savings and potentially leaving you without enough funds for retirement.
Types of Pension Scams
There are several types of pension scams that fraudsters may use to try and deceive individuals:
1. Cold-calling scams: Fraudsters may contact you out of the blue, offering investment opportunities or pension services that may seem too good to be true. They may pressure you to make quick decisions or request personal and financial information.
2. Investment scams: Fraudsters may promise high returns on investments, often in risky or non-existent schemes. They may use persuasive tactics and false information to convince you to invest your pension savings.
3. Pension liberation scams: These scams encourage individuals to access their pension funds before the age of 55, promising early access to cash. However, accessing your pension early without a genuine reason can result in hefty tax penalties.
Protecting Yourself Against Pension Scams
It is important to take steps to protect yourself against pension scams:
1. Be cautious: Be wary of unsolicited communications, especially cold calls. Remember that reputable financial institutions and advisors will not pressure you into making hasty decisions.
2. Do your research: Before making any investment or pension-related decisions, thoroughly research the company and individuals involved. Check for any warnings or red flags, such as unregistered firms or suspicious reviews.
3. Seek professional advice: Consult with a qualified financial advisor or pension specialist before making any significant changes to your pension arrangements. They can help you understand the risks and make informed decisions.
4. Protect your personal information: Never share sensitive personal or financial information, such as your National Insurance number or bank account details, with anyone you do not trust completely.
5. Report suspicious activity: If you suspect you have been targeted by a pension scam or have fallen victim to fraud, report it to the relevant authorities, such as Action Fraud or the Financial Conduct Authority.
By staying informed and vigilant, you can protect yourself from falling victim to pension scams and safeguard your hard-earned pension benefits in the UK.
Benefits for Low-Income Individuals and Families
In the United Kingdom, there are various benefits available to support low-income individuals and families. These benefits are designed to provide financial assistance and help improve the quality of life for those who need it most.
One of the main benefits available is the pension scheme. This scheme provides a regular income for individuals who have reached a certain age and have retired. It ensures that older individuals are able to meet their basic needs and maintain a decent standard of living.
Additionally, there are various other benefits that low-income individuals and families can access. These include housing benefits, which help with the cost of rent or mortgage payments, and council tax reduction, which provides a discount on local property taxes. These benefits ensure that individuals and families are able to afford suitable housing and reduce the burden of living expenses.
Furthermore, there are benefits available to support low-income families with children. This includes child benefit, which is a regular payment made to families for each child they have, and child tax credits, which provide additional financial assistance to families with dependent children. These benefits aim to alleviate the financial strain of raising a family and ensure that children have the necessary support and resources.
It is important for low-income individuals and families to be aware of the benefits they may be eligible for and how to apply for them. The government provides comprehensive information and resources on their official website, as well as local authorities and support services that can offer guidance and assistance.
Overall, the benefits available in the UK provide crucial support to low-income individuals and families, helping them to overcome financial challenges and improve their overall well-being. It is important to take advantage of these benefits and ensure that those in need receive the assistance they are entitled to.
Disability Benefits and Personal Independence Payment (PIP)
Disability benefits in the UK are designed to provide financial support to individuals with disabilities. One such benefit is the Personal Independence Payment (PIP), which replaced the Disability Living Allowance (DLA) in 2013. PIP is intended to help with the additional costs associated with a long-term health condition or disabilities.
To be eligible for PIP, you must be between 16 and state pension age, have a long-term health condition or disability, and have difficulty with daily living tasks or getting around. The amount of benefit you receive depends on how your condition impacts your ability to carry out these activities.
Prior to applying for PIP, it is important to gather evidence of your condition, including medical records, doctor’s notes, and any other supporting documentation. You will also need to undergo an assessment to determine your level of eligibility.
PIP is split into two components: the daily living component and the mobility component. The daily living component is for individuals who need help with tasks such as preparing meals, taking medication, or dressing. The mobility component is for those who have difficulties with getting around, either indoors or outdoors.
If you are awarded PIP, the benefit is paid every four weeks into your bank account. The amount you receive will depend on your individual circumstances and the level of support you require. PIP is not means-tested, so it does not matter how much income or savings you have.
It is important to note that PIP is a non-taxable benefit, and it can be received in addition to other benefits you may be entitled to, such as Employment and Support Allowance (ESA) or Universal Credit (UC).
If you are unsure about your eligibility for PIP or need assistance with the application process, it is recommended to seek advice from organizations such as Citizens Advice or disability advocacy groups.
Jobseeker’s Allowance (JSA) and Universal Credit (UC)
The Jobseeker’s Allowance (JSA) and Universal Credit (UC) are two key benefits in the UK that support individuals who are unemployed and actively seeking work.
The Jobseeker’s Allowance is a benefit that provides financial support to individuals who are actively looking for work but are currently unemployed. It is available to both unemployed individuals who have made sufficient National Insurance contributions and those who have not.
Universal Credit, on the other hand, is a relatively new benefit that has replaced several older benefits, including the Jobseeker’s Allowance. It is a monthly payment that provides support to individuals who are unemployed, self-employed, or in low-income work. Universal Credit is means-tested and takes into account various factors, such as the individual’s income, savings, and housing costs.
Both benefits provide financial support to individuals while they are searching for employment. In addition to the financial assistance, individuals receiving these benefits may also be eligible for other support, such as help with housing costs or training opportunities.
To apply for either the Jobseeker’s Allowance or Universal Credit, individuals need to contact their local Jobcentre Plus office or apply online through the government’s official website. The application process may involve providing personal information, details about employment history, and proof of identity.
It is important to note that the amount of Jobseeker’s Allowance or Universal Credit an individual receives can vary based on their circumstances, such as their age, income, and whether they have any dependents. The benefits may also be subject to regular reviews and assessments to ensure that individuals are actively seeking employment and meeting the eligibility criteria.
Overall, the Jobseeker’s Allowance and Universal Credit play an essential role in providing financial support to individuals who are actively seeking employment. These benefits not only help individuals cover their basic living expenses but also provide additional support to help them find work and improve their overall financial situation.
Housing Benefits and Council Tax Support
In the UK, there are various benefits available to assist individuals and families with their housing costs and council tax. These benefits are designed to provide financial support to those who are struggling to afford their rent or council tax payments.
Housing Benefit is a payment that can help with rent payments for individuals who are on a low income or claiming certain benefits. The amount of Housing Benefit you may be entitled to will depend on factors such as your income, savings, and the number of people living in your household. It is important to note that Housing Benefit is gradually being replaced by Universal Credit, which is a single monthly payment that includes support for housing costs.
Council Tax Support is a benefit that can help individuals and families with their council tax payments. The amount of Council Tax Support you may receive will depend on factors such as your income, savings, and the local council tax rates in your area. Each local council will have its own Council Tax Support scheme, so it is important to contact your local council for more information on how to claim.
To apply for Housing Benefit and Council Tax Support, you will need to contact your local council and complete an application form. It is vital to provide all necessary documentation and accurate information to ensure that your claim is processed correctly. The application process may involve providing proof of identity, income, savings, and other relevant documents.
If you are eligible for Housing Benefit or Council Tax Support, the payments will usually be made directly to your landlord or local council. However, if you receive Universal Credit, your housing costs will be included in your monthly payment, and it will be your responsibility to pay your rent to your landlord.
It is essential to keep your local council informed about any changes in your circumstances that may affect your entitlement to Housing Benefit or Council Tax Support. Failure to do so may result in an overpayment, which will need to be repaid.
Overall, Housing Benefits and Council Tax Support play a crucial role in helping individuals and families in the UK manage their housing costs and council tax. If you find yourself struggling to afford your rent or council tax payments, it is advisable to contact your local council for further guidance and support.
Maternity, Paternity, and Parental Leave Benefits
Having a child is a significant milestone in an individual’s life, and the UK government recognizes the importance of supporting parents during this time. To ensure that parents can take time off work to care for their newborn, the UK offers a range of maternity, paternity, and parental leave benefits.
Maternity Leave
In the UK, employed women are entitled to up to 52 weeks of maternity leave. This leave can be taken as a combination of ordinary maternity leave and additional maternity leave, depending on the individual’s circumstances. During maternity leave, eligible individuals may be eligible for Statutory Maternity Pay (SMP) for up to 39 weeks.
Paternity Leave
While traditionally the focus has been on maternity leave, the UK also recognizes the importance of fathers in a child’s development. Paternity leave allows fathers to take time off work to care for their newborn. Eligible fathers can take 1 or 2 weeks of paternity leave, depending on their circumstances, and may be eligible for Statutory Paternity Pay (SPP) during this time.
Shared Parental Leave
The UK also offers Shared Parental Leave (SPL), which allows parents to share leave and pay in the first year after their child’s birth or adoption. This means that eligible parents can take time off work at the same time or take turns caring for their child. SPL provides flexibility and allows parents to decide how to divide their leave and pay between them.
To be eligible for maternity, paternity, or shared parental leave benefits, individuals typically need to meet certain qualifying criteria, such as having worked for their employer for a specific period of time. It’s important to check with the UK government’s official website for the most up-to-date information on eligibility requirements and how to apply for these benefits.
Overall, the UK’s maternity, paternity, and parental leave benefits aim to support parents in balancing work and family life. These benefits provide financial support and time away from work, allowing parents to bond with their child and ensure their well-being during the early years.
Sickness, Disability, and Carer’s Benefits
In the UK, there are several benefits available to individuals who are unable to work due to sickness, disability, or those who are caring for someone in need.
1. Statutory Sick Pay (SSP) is a payment made by employers to employees who are too unwell to work. It is paid for up to 28 weeks and is intended to provide financial support during a period of illness.
2. Employment and Support Allowance (ESA) is a benefit for individuals who are unable to work due to a health condition or disability. It provides financial support and access to work-related support and commitment activities.
3. Personal Independence Payment (PIP) is a benefit for individuals aged 16 to 64 who have a disability or long-term health condition. It is designed to help with the costs associated with daily living and mobility.
4. Carer’s Allowance is a benefit for individuals who care for someone receiving certain disability benefits. It provides financial support to those who spend at least 35 hours per week caring for someone in need.
5. Industrial Injuries Disablement Benefit (IIDB) is a benefit for individuals who have a disability or illness caused by their work. It provides financial support to those who have an employment-related injury or disease.
These benefits aim to provide financial support and assistance to individuals who are unable to work due to sickness, disability, or those who are taking on the responsibility of caring for someone in need. It is important to understand the eligibility criteria and application process for each benefit in order to access the support available.
Q&A:
What is a pension?
A pension is a retirement plan that provides regular income to individuals after they have retired from employment.
How do pensions work in the UK?
In the UK, there are two main types of pensions: state pensions and private pensions. State pensions are provided by the government and are based on an individual’s National Insurance contributions. Private pensions are set up by individuals or employers and can be contributed to throughout a person’s working life. The amount of pension income someone receives in retirement will depend on factors such as their contributions, the performance of their pension investments, and the age at which they start taking their pension.
When can I start receiving a state pension in the UK?
The age at which you can start receiving a state pension in the UK depends on your date of birth. Currently, the state pension age is gradually increasing to 66 for both men and women. It is expected to rise further to 67 and potentially beyond in the future.
What are the benefits of having a pension?
Having a pension can provide financial security in retirement by providing a regular income. It can also offer tax advantages, as contributions to pensions are often tax-deductible and the growth of investments within a pension is tax-free. Additionally, some employers may match employees’ pension contributions, increasing the overall amount saved for retirement.
Can I access my pension before retirement age?
In most cases, you cannot access your pension before the age of 55. However, there are some circumstances in which early access may be allowed, such as if you are in ill health or have a protected retirement age due to certain occupations.
What is a pension in the UK?
A pension in the UK is a financial arrangement that individuals contribute to during their working years to provide them with an income in retirement. It is a way to save money while working to ensure financial security in later years.