A pension is a savings plan intended to save money for your future. A retirement plan is specifically designed to provide you an income to live on for the time of your life when you won’t be working anymore. By opening a pension you will be investing in your future by regularly depositing money on your fund during your working years.
The main types of pensions in the UK
Nowadays, UK residents can choose between a lot of types of pension funds, each of which has been designed to meet the needs of many different categories of people. Even though all retirement plans are different from one another, there are some rules that apply to every fund available. For instance, each pension scheme will offer you benefits from the point of view of taxes and contributions, which have been specifically designed to help you save money for your retirement. Read more https://www.moneyfarm.com/uk/pension/
By adding money to your pension fund, you’ll basically be investing it and giving it the chance to grow over time. The government will also contribute to your retirement plan through tax relief. When you stop working, you will be given access to your savings. Let’s have a look on the main categories of pensions available in the UK.
What is a workplace pension and how it works
A workplace pension, which can also be called occupational or company pension, is a particular retirement scheme to which your employer will contribute too. Nowadays, all employers in the UK have a duty to provide their employees with a retirement scheme. Both you and your employers will monthly contribute a minimum amount. The government will also contribute to your future through tax relief. The occupational pension is in turn divided into two categories, which are called defined contribution pension scheme and defined benefit pension scheme. By choosing the first one, both you and your employer will monthly contribute to your pension fund: the money you deposit will be then invested by the pension provider. This way, the amount of capital you’ll get when you stop working will adjust to the performance of the investments. By choosing a defined benefit pension scheme, you’ll gain access to a pre-established amount at the age of 55. The amount you get will depend on how many years you’ve worked and on how much money you deposited during your working life.
What is a personal pension and how it works
A personal pension, also called private pension, is a particular kind of retirement scheme that gives the account holder more control over the amount deposited. Usually, a personal pension is the choice for independent workers because it is specifically designed to allow the account holder to choose the amount to deposit, but everyone in the UK can open arrange it. Just like any other kind of retirement fund, the government will contribute through tax relief as well. By choosing a personal pension plan you will choose how much and when pay in and the final amount of your pension pot will depend on how the fund’s investments have performed throughout the years.
What is a state pension and how it works
The last type of pension available in the UK is called state pension, which is specifically designed to allow the account holder to access his savings as soon as he reaches his retirement age, which is currently set at 55 years old. To open this kind of pension scheme you will have to meet some requirements: for example, you will have to prove that you have at least ten years of contributions.
