All You Need to Know About Pensions in the UK
If you are starting to arrange your own life after your working years, you should firstly try to figure out what a pension is and how it can help you to have a secure economic future once you stop working. As a matter of fact, a pension is a fund where you can deposit your savings to ensure an economically stable future for you and your family. A pension is indeed a long-term saving scheme designed to provide you with an income to which you can peacefully live on. By opening a pension, you are practically investing in your future and in the future of your family, setting aside a small amount each month that can guarantee you a peaceful life after years of work. Nowadays, UK residents have a wide choice regarding the type of retirement scheme to open. Even though all plans available are different, they have in common some important rules to know before opening a fund. First of all, all UK pensions are designed to ensure numerous tax and contribution advantages. Also, the government will always contribute to your future through tax relief. Another important thing to keep in mind is that the money you put in your retirement fund will always be invested by the pension provider. This will give your capital a chance to grow but will also involves risk. Lastly, a date will be set for you to access your money. In the UK, the retirement age is currently set at 55 years old for most retirement schemes, except for the state pension. Let’s have a look on the main types of pensions available in the UK.
What is the private pension and how it works
The private pension is a specific type of individual retirement scheme that you can arrange yourself with the help of a pension provider. Most of the people who choose the private pension are self-employed who therefore cannot count on the monthly contribution of the employer. By opening a private pension you’ll be able to choose your pension provider, how much and how often to deposit on your fund. Nowadays you have a wide choice regarding the many pension providers available in the UK to offer this kind of scheme. For instance, if you’re interested in and you want to know more about, you can check Moneyfarm private pension plan.
What is the workplace pension and how it works
The workplace pension, which is also called company or occupational pension, is the most common type of retirement plan currently available in the United Kingdom. It is indeed a savings plan to which your employer will monthly contribute too. As a matter of fact, in the UK, all employers are compelled to contribute to their employees’ future by depositing a minimum amount every month. The government will contribute too through tax relief. This scheme comes in two different types: by choosing the defined contribution pension scheme you and your employer will have to pay a percentage of your salary every month to build your retirement fund. Then your money will be invested by the pension provider: this means that the amount you get will depend on how well the investments will perform, so be always prepared for the chance to get back less than expected. On the other hand, the defined benefit pension scheme will give you access to a defined amount of funds when you reach your retirement age, which is currently set at 55.
What is the state pension and how it works
Lastly, you can choose the state pension, which is a retirement fund which will give you free access to all your savings once you reach the retirement age, which for this particular type of scheme has been set at 66 years old. In this case, the amount you get will only depend on how much you put on your fund every month and of course on your contributions.