Have you planned your retirement yet? When it comes to stopping work, do you fancy travelling or spending more time with your family? Retirement may seem like a long way off, but the sooner you start putting money into a pension, the less you have to worry about your finances later on in life. To help you decide where to put your money, here’s a summary of the different types of pensions available.
Pensions that are available
Along with the State Pension from the government, there are 2 main types of pension:
- Defined Contribution – based on how much money has been paid into your pension pot
- Defined Benefit (final salary or career average) – based on your salary and how long you’ve worked for your employer.
The State Pension
The pension you get from the government is called the State Pension. You get it when you reach State Pension age.
You don’t normally get it automatically – you have to claim the State Pension.
If you reached State Pension age on or after 6 April 2016 you’ll get the new State Pension payment which is £179.60 a week.
If you reached State Pension age before 6 April 2016 the most you can currently get from the basic State Pension is £137.60 a week.
These are sometimes known as ‘money purchase’ pensions.
They can be personal pensions arranged by you or workplace pensions arranged by your employer. The money paid in by you or your employer is put into investments by your pension provider. The amount you get when you come to take your pot depends on how much was paid in and how well the investments have done. The value of your pot can go up or down depending on your investments. With defined contribution pensions you decide how to take your money out.
Types of defined contribution pension, include:
- Executive pension plan
- Group personal pension
- Master trust pension (e.g. NEST, NOW pension, the People’s Pension)
- SIPP (Self Invested Personal Pension)
- SSAS (Small Self Administered Schemes)
- Stakeholder pension A
These are sometimes known as ‘final salary’ or ‘career average’ pensions.
Defined Benefit pensions are nearly always workplace pensions arranged by your employer. How much you get depends on your salary, how long you’ve worked for your employer and a calculation made under the rules of your pension scheme.
Your provider guarantees a certain amount each year when you retire.
This guide is intended as guidance only, and is not financial advice. For financial advice please speak to a qualified adviser. Ammonite is an appointed representative of Julian Harris Financial Consultants Ltd, which is authorised and regulated by the Financial Conduct Authority.