Idiot's guide to pensions please

[FeelingLucky13]

I can't believe I've just turned 50 and I don't know the answer to this Q:
If I have a private pension, is this taken into account for my eligibility for a state pension?
DH and I don't have a private pension, but we're thinking of starting one - we both work via our own limited company and the accountant says it's a good idea to start one. But what is the point if it going to be deducted from state pension?
I don't think either of us will ever retire fully (we work in the creative industry, in an area we love and we could easily carry on working to the end), but we might want to take on less projects as we age.
We're not big spenders so no need for loads of money to go on holidays, etc. Just enough for basic living without the burden of a mortgage and school fees really.

I've been googling around trying to find an idiot's guide to pensions as I know nothing about them and all the hits I get are for brokers selling pension schemes.
Does anyone have a good link?

No. Your entitlement to a State Pension depends only upon your having paid sufficient National Insurance contributions over the years. You need at least 10 years' worth to be eligible, and 35 years' to qualify for the full State Pension, under current rules.

The reason your accountant is suggesting you start a private pension is because it offers a number of tax efficiencies and your accountant will be trying to make sure that you do not pay more tax than is necessary. This is not tax evasion (which is illegal); this is prudent financial planning.

The Money Advice Service website is a good starting point for learning about pensions - it is the government's free guide and is written in straightforward language.

Thank you Sunseed!

Goodness, absolutely start one. You can’t rely on working to the end. My lovely dad was creative, very talented and clever. Dementia had other plans for him. Thank god he had his pensions and life insurance in order.

State pension even with 35 years NI contributions is not exactly living the dream, and potentially ok for two of you but at some point there will likely only be one of you and paying all the bills in a rent/mortgage free house on £175 a week doesn’t fill me with joy.

But I have 36 years private pension too. Not a gloaty post just genuine advice for you from someone currently sorting out dads estate and seeing what little regular amount mum now has to live on (savings excepted).

It doesn’t get deducted as such. However, there is a pension guarantee credit that ensures a minimum basic income in the form of a top up Which you will not get if your income is above the minimum level or you have savings above a specified amount which will be deemed to produce an income for such an amount.

I’d definitely start a private pension ASAP. I wouldn’t want to live off the state pension alone. You’ve got time to get a meaningful amount in there, so it’s worth doing.

Assuming you're in the UK (you mention school fees, which most people here don't pay unless they choose private school, so that makes me wonder if you're somewhere else?) you'll be entitled to about £350 pw between you, which is probably plenty if you're mortgage free and don't have extravagent wants, but it won't pay out until you're 67.

If you save in a private pension, you'll get whatever you save topped up by tax relief, which is an instant win, and you'll be able to start to take some of the money when you're 55, so it will be available if you want or need to work less after that age. Some sort of low cost SIPP like Vanguard is probably a good choice.

Moneysaving Expert offers free financial education courses and one module covers pensions, so that might be a good thing to look at before committing:

www.open.edu/openlearn/money-business/mses-academy-money/content-section-overview?active-tab=description-tab