What is a Pension Plan? Workplace and personal pensions are tax-efficient, long term ways of saving money for your retirement.
Occupational and private pension schemes help to secure a regular income with financial benefits for people in older life.
Individuals, or their employers, can put aside long term investment contributions throughout their working lives.
The aim is for the maturing fund - pension pot - to make a profit. In most cases the fund yields regular payments for pensioners during old age retirement.
Pension funds often grow best when a percentage of your earnings is automatically invested. In most cases the money goes into stocks and shares. As the fund grows it should provide you with regular payments during your old age retirement.
The pot payments are usually deducted from your salary on paydays. As a rule your employer contributes extra money into the same fund. That means your pension scheme also benefits from governmental tax relief. There are different pension rules for self-employed workers.
When you are eligible to receive your pension, the fund pays you a regular income while you are alive. The scheme allows you to take a tax-free lump sum from your workplace pension when you retire.
In some circumstances you can take it all in one payment. This is more common if your savings are minimal. But, single lump sums are liable to income tax after the first 25%.
Investments carry degrees of risk. The value of stocks and shares fluctuates up and down. But, higher returns often result from investments in areas with higher risk.
Most financial advisers consider bonds to be less risky. There is more guarantee against losing your money. That means there is less risk to the value of your pension pot. But, a bad financial decision could affect the value of your final pension savings.
RETIRING EARLY: Taking early retirement is a viable option for many people nowadays. So, how does retiring early affect a pension and the welfare benefits you get?
RETIREMENT PLANNING: The information in the guide will help you plan your retirement income. It explains how to work out the amount you might get when you retire so you can plan ahead.
PERSONAL PENSION RULES: Information in the section explains the rules of personal pensions and your rights. There is further guidance on choosing a personal pension (e.g. stakeholder pensions).
PRIVATE PENSION RULES: The section explains the two different types of private pension plans and how they work. Check what you can get from 'defined contribution' and 'defined benefit' pension schemes.
SIPP PENSION RULES: The self-invested personal pension is the buzz word in low-cost DIY retirement planning. Find out everything you need to know about SIPPs including how to start a SIPP.
UK STATE PENSION: The State Pension pays a regular payment to most people during their life in retirement. The government old age pension starts when you reach the official retirement age.
COMPANY PENSION RULES: The UK government operates a workplace pension scheme that supplies a monthly allowance to individuals who are older than the official retirement age. This welfare benefit also applies to support some widows, widowers, and disabled people.
Seek impartial or professional advice from an independent financial adviser before making investments.
State Pension, Company Pensions, and Personal Pension Rules Overview for the UK