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Making sure we have enough money for our retirement is one of the biggest, if not the biggest, investment goals most of us will ever face. It's also a topic that can inspire confusion.

How much do you know about the subject? Test yourself with our two-part quiz, starting with these nine questions:

  • Am I eligible for the state pension?
  • How much will I get from the state pension?
  • Will I be able to live on the state pension?
  • What are workplace pensions?
  • Will my workplace and state pensions be enough?
  • What if I have more than one workplace pension?
  • What are my pension options if I am self-employed?
  • What is pension tax relief and how does it work?
  • Is pension tax relief the same for everyone?


If you don’t know all the answers to these questions or are a little unsure, don’t worry. Here’s a helping hand from us to help keep your financial preparations on point.

1. Am I eligible for the state pension?

Yes, most probably, but it depends on your national insurance record. In general, you need 10 years of national insurance contributions over your working life to get any state pension. This includes voluntary contributions or credits received while unemployed or ill or acting as a parent or carer1. To get the full state pension, you need 35 qualifying years.

2. How much will I get from the state pension?

The full new state pension is currently worth £9,339.20 a year and is expected to rise by 3.1% to £9,627.80 in the 2022/23 tax year. How much you get will depend on how much national insurance you have paid by the time you retire. If in doubt, get a forecast from the government based on your own personal circumstances. 

3. Will the state pension be enough for me when I retire?

It is reasonable to assume that everyone would want their desired lifestyle reflected in their retirement income. So if you think your living costs will probably be higher than the state pension, and you don't have any other sources of income, it’s probably time to think about building an additional retirement fund. The Money & Pensions Service, sponsored by the Department for Work & Pensions, doesn’t pull its punches: “The State Pension is an important income for most people. But, on its own, it is unlikely to provide you with enough money to maintain the standard of living you might like. So it’s important to plan how you’ll provide yourself with the rest of the retirement income you’ll need.”

That is where having a workplace pension, or a self-invested personal pension (SIPP) in which you independently invest money for your retirement, can help.

4. What are workplace pensions?

Also known as occupational or company pensions, these have been around a very long time. It was only in 2012, though, that the government introduced rules requiring UK employers to automatically enroll their staff into these schemes. Employees aged 22 or over have a minimum 5% of their salaries paid into them each month, with employers paying a minimum 3% on top too1, although some choose to pay more and/or may match their employees’ additional voluntary contributions. You can earn tax relief on your pension contributions too (more on this later).

5. Will my workplace and state pensions, combined, be enough for me when I retire?

This is where the quiz gets a little harder. But don’t be put off! Pension providers are obliged to provide you with an annual statement that specifies, among other things, how much you have in your occupational pension pot and an estimate of what you might be able to earn when you retire2. You can often track this online also. If unsure, ask your employer. Just make sure to note the assumptions behind the projections – including the age at which you are expected to retire and how well the money invested is expected to perform.

Once you have a combined figure – and some projections may automatically incorporate the state pension for you – it’s back to Question 3: does the expected income match your aspirations? If not, should you consider investing more in your workplace pension to take greater advantage of any employer matching? Failing that, should you be making additional provisions anyway, whether through your employer scheme or with a personal pension such as a SIPP?

6. What if I have more than one workplace pension?

Switching jobs is part of life, so you may end up with several workplace pensions. However, you have the option to simplify by consolidating all or some of your pensions into a single SIPP. Doing so may give you greater clarity over your retirement finances and, as a result, improve your chances of investment success. There is also evidence to suggest smaller pots in retirement can be spent too quickly3 or left to stagnate with inappropriate investment strategies4. However, be aware that some company pensions carry additional benefits and may not be suitable for a transfer into a SIPP. If in doubt, seek advice.

7. What are my pension options if I am self-employed?

Around 5 million people are registered as self-employed in the UK5, which is potentially a lot of people without a workplace pension. Personal pensions such as SIPPs can help fill this gap. And as with workplace pensions, you can earn tax relief on your SIPP contributions too.

8. What is pension tax relief and how does it work?

Currently, you can pay up to £40,000 tax free each year into a pension (or 100% of your annual earnings or net profit, if lower)6. In practice, this means the government tops up your contributions by giving you back the income tax you would otherwise pay on that money. So, if you’re a basic-rate taxpayer, a contribution of £32,000 gets you the maximum £40,000 tax benefit since the government adds back another £8,000 on top (that is, the 20% you would otherwise pay in tax on that £40,000). Similarly, if you make a £8,000 contribution, this is topped up with to £10,000, and so on. You don’t have to do anything; your pension provider claims it back from the government for you.

9. Is pension tax relief set at the same rate for everyone?

No. If you are in a higher income tax bracket, you can claim back even more on your pension contributions. The only difference is that rather than it happening automatically, as is the case with the first 20% of basic-rate tax paid, you claim the rest through your annual tax return. The maths gets complicated if you earn between £100,000 and £125,140, due to the gradual phasing out of personal tax allowances, which can bump up the potential tax relief on a person’s pension contributions still further! But, setting aside this quirk in the tax system, we can say that every £1,000 pension fund contribution will effectively cost most higher-rate taxpayers just £600 (or £550 if they are additional-rate taxpayers earnings more than £150,000 a year)7.

So, how have you done so far? It’s a lot to take in, admittedly, so maybe a quick tea break is in order. But if you are ready to plough on, here is the second part of our retirement quiz.



1 As of 2021/22.

2 New rules as of October 2022 will require all pension providers to provide members with the following information in their annual benefits statement:

  • How much money they have in their pension plan and what has been saved in the statement year.
  • How much money they could have when they retire.
  • What they could do to give themselves more money at retirement.

3 Pension Freedoms: a qualitative research study of individuals’ decumulation journeys,
Department for Work & Pensions, 28 October 2020.

4 Achieving good retirement outcomes, XPS Pensions Group, November 2021.

5 Although the total may have taken a knock during the pandemic, it was more than 5 million at the end of 2019, representing 15.3% of all employment, according to the Office for National Statistics

6 As of 2021/22.

7 As of 2021/22.


Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Eligibility to invest in a Vanguard Personal Pension depends on your individual circumstances. Please be aware that pension and tax rules may change in the future and the value of investments can go down as well as up, so you might get back less than you invested. You cannot usually access your pension savings or make any withdrawals until the age of 55.

If you are not sure of the suitability or appropriateness of any investment, product or service you should consult an authorised financial adviser. Please note this may incur a charge.

Important information

This article is designed for use by, and is directed only at, persons resident in the UK If you have any questions related to your investment decision or the suitability or appropriateness for you of the product[s] described in this document, please contact your financial adviser.

The information contained in this article is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so.

The information in this article does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this article when making any investment decisions.

Issued by Vanguard Asset Management Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.

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