Take control with the right kind of pension
There are six main types of pension, all with different features and benefits. Understanding what pension you’ve got and how it works is the first step to making sure your financial future is as secure as possible.
Personal pensions come in all shapes and sizes. The key things they have in common are that they will involve a personal contract between you and your pension provider, and their aim will be to provide you with an income in retirement. Plus, the value of your pension will depend on: how much you have contributed; how long you have saved for; how well your investments have done, and the impact of scheme charges. Discover more.
Government legislation makes it compulsory for all employers to offer eligible employees a workplace pension. The employer is obliged to make a minimum, regular contribution to the scheme and all employee contributions will benefit from tax relief. All you need to know including: if you are eligible; what your employer should be contributing; whether you can opt out, and how your money is invested. Discover more.
Final salary pensions
A final salary pension is essentially a promise by your employer to pay you a set income for life, once you reach a specified age. These types of pensions are usually extremely valuable and historically were commonplace. Today, they sometimes make the headlines for all the wrong reasons (think BHS and Carillion). Get to grips with the pros and cons of a final salary scheme and the key things you need to consider. Discover more.
Like final salary pensions, an unfunded scheme can be extremely valuable and promises to pay you a set income for life. The big difference is: you cannot make any changes to an unfunded scheme, including transferring out of it. This type of pension covers many government and public sector employees.
Before the auto-enrolment legislation was introduced, all but the smallest companies were obliged to offer their staff access to at least a stakeholder pension. Normally, the company would choose a limited range of investments for you and there is a cap on charges. The low charges and flexibility offered by modern pension schemes have made stakeholder pensions all but obsolete.
With profits pensions
The idea behind these schemes is sensible enough – to try and smooth out the ups and downs of investment markets for savers. Providers do this by managing the bonuses they declare each year, with these bonuses making up the growth of your pension. On the flip side, these types of pension are far from transparent, which makes it very difficult to compare with other schemes to see if you are getting the best deal.