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Pension Product Options

The UK state pension age increased to 66 and is set to rise further.  Men and women born between 6 October, 1954 and 5 April, 1960, will start receiving their pension on their 66th birthday.  For those born after that, there will be a phased increase in state pension age to 67, and eventually 68.

 

If you are self-employed or you have no earnings but can afford to save for retirement.  Then setting up a private Pension Plan may be a suitable way for you to save for those relaxing years ahead.

 

When you take out a pension, you get to decide how you want your money to be invested (depending on the type of arrangement that you take).  And how you balance the risks you feel comfortable taking.

 

You can discuss your options and financial needs with a licensed pension specialist.   They will help you understand what options are available and decide which plan is best for you and your family.

 

There are two main types of pensions: defined contribution and defined benefit.

 

A defined contribution pension is based on the total that has been paid into your pension. You can choose from different types of  defined contribution pensions as detailed below

 

A defined benefit pension is also known as "final Salary" or "career average" pension.  These pensions are most often workplace pensions arranged by your employer.

 

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WARNING: In no way should the information on this website be construed as advice, it is for information purposes only.  Always take the advice of a licensed financial advisor before opening, transferring  or making any changes to a pension.

Your pension payouts depend on your salary, the length of time spent with the company and a calculation made under the rules of your pension scheme.  You receive a set amount that is guaranteed by your provider each year when you retire.

 

A licensed financial adviser can help you choose the best pension option that suits your financial situation and goals.  They can also help you transfer an existing or dormant pension over to a better plan.

Defined Contribution

A defined contribution pension or "money purchase" pensions are personal pensions arranged by you or your employer.

 

The money you or your employer pays towards your pension is invested by the pension provider on your behalf. This pension plan which offers value, security and flexibility to reflect today’s modern family lifestyles. However, every investment carries potential risk and your pension payouts can vary depending on the investments made.

 

Types of defined contribution pensions.

(click for more information)

 

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Executive Pension Plan

Executive pension plans (EPP) are tax efficient savings plans set up by the company for key employees.  The employer (and sometimes the employee) pays into the plan, to build a tax efficient fund, which is used at retirement to provide tax free cash and a pension income.

 

For the individual, there is flexibility of retirement, allowing the person to retire early and hand over to others (although benefits can only be taken currently from age 55, rising to 57 from 2028, unless a protected pension age exists which allows benefits to taken earlier) or work well past the company's normal retirement date.

Group Personal Pension

Group personal pensions (GPPs) are a type of defined contribution pension which some employers offer to their workers.  The scheme is run by a pension provider that your employer chooses, but your pension is an individual contract between you and the provider.

 

The provider claims tax relief at the basic rate on your contributions and adds it to your fund.

 

Your pension pot builds up using your contributions, and contributions your employer makes, investment returns and tax relief.

 

You can access and use your pension pot in any way you wish from age 55.

Master Trust Pension

Master trust pensions are an occupational pension scheme which is set up under trust.  Master trusts are set up by a scheme funder, which is the company that provides financial support to the scheme.

 

The schemes aim is to provide a workplace pension that can be used by multiple unrelated employers.

 

Master trust pension schemes offer a cheap, efficient, and easy way to save for retirement.

 

Regulatory framework makes master trust pension schemes transparent and upfront.

 

The default funds are lifestyled as savers approach retirement, Many master trusts allow flexible access to pension pots, though some require savers to transfer out to get the full range of pension flexibilities.

SIPP

Self-invested personal pensions (SIPPs) are an individual contract between you and the pension provider.  SIPPs offer much wider investment powers that can allow you to invest in a range of assets including:

 

  • Quoted UK & overseas stocks & shares
  • unlisted shares
  • collective investments (such as OEICs and unit trusts)
  • investment trusts
  • property & land insurance bonds (but not most residential property)

 

Under current legislation, you can commence drawing retirement benefits from the age of 55 and you don't have to stop work to draw benefits

SSAS

SSAS (small self administered scheme) pensions are a type of workplace pension which can be independently managed by the company that sets it up.  It does not require any interaction with financial institutions or insurance companies and is usually set up by senior members of staff to provide increased retirement benefits and greater investment flexibility.  Members of an SSAS pension can choose how their pension savings are invested and can use their SSAS pension to invest in the company.

 

Members of an SSAS pension can start drawing benefits at age 55.  Like all personal or workplace pensions you can choose to take the first 25% of your pot as a tax-free lump sum or receive 25% of each withdrawal tax-free.

Stakeholder Pension

Stakeholder pensions are specially designed to be accessible to everyone and provide a flexible way for savers to build a retirement income.  They can be particularly useful if you are on a low income or are self employed and may not meet the conditions of other pension schemes.

 

If you are working, your employer may choose to contribute to your stakeholder pension but are not obligated to and it is possible to set up a stakeholder pension for yourself.  In addition to your employer, other individuals, such as your spouse or partner can also contribute to your stakeholder pension and you can contribute to theirs.

 

Like all defined contribution pensions, you’re able to withdraw the funds in your stakeholder pension from the age of 55. You can take up to 25% as a tax-free lump sum and either withdraw the remaining 75%, use it to purchase an annuity, keep it invested via draw down or delay drawing it altogether.

Unsure which pension scheme is best for you?

 

Register with Money Depot and get in touch with an independent financial adviser to review your situation, help you make a wise decision and secure a more comfortable retirement.

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