Your retirement years are approaching, and you’re still not sure about what pension type to choose? Don’t worry, today British residents are spoiled for choice when it comes to choosing their retirement plan. All pensions have been specifically intended to help the account holder build his future by providing a monthly income to which he can serenely live on when he stops working. As mentioned above, there are many types of pensions schemes available in the United Kingdom, such as the personal pension, workplace pension and state pension among which you can choose the right one for you. If you want to have a clear picture of how much you will be saving for retirement, you can also check Moneyfarm’s website in order to estimate it.
Now let’s discover what are the most common pension schemes for UK citizens.
You can choose between many pensions
Nowadays, UK citizens are free to choose between a great diversity of retirement plans, each of every one has been designed to help certain categories of people. Even though the British plans currently available are all different from each other, there are some rules that apply to all of them. For instance, no matter what trust you choose, you won’t be able to withdraw your money until you reach the retirement age. This date has been set at 55 for every scheme available expect for the state pension, which will give you access to the money you saved at 66. Also, whichever type you choose, you’ll always be able to count on the Government’s contribution, which will always apply tax relief.
A pension for employees
The most common type of pension is called “workplace pension”. In the UK you can also refer to it as occupational or company pension, and it consists of a monthly payment that both you and your employers make. In fact, in the United Kingdom all employers are required to help their employees to build a consistent pension pot, which will provide them with an income to live on when they stop working. The government will also contribute to your pot through tax relief. If you choose the defined contribution pension scheme both you and your boss will contribute to your pension fund: the money you deposit will be later invested. This means that your savings might have a chance to grow but will also be put at constant risk. When investing, the chance of getting a lower figure than expected is always around the corner. There’s also a second type of plan, which is called define benefit pension scheme: by choosing this one you’ll receive a pre-established sum as soon as you reach the retirement age, which will solely depend on how much you put on your fund every month.
A pension of self-employed workers
If you you’re not an employee and you work on your own, there’s a special kind of pension for you. The private pension is intended for self-employed workers who can’t count on the support of their employer. This kind of fund is very convenient, because it gives the holder the freedom to choose the sum to deposit every month. Like any other kind of pension, the Government will apply tax relief to help you build your pot.
A pension based on contributions
Lastly you can open the state pension, which is another kind of pension currently available in the UK. Not everyone is eligible to get this kind of pension, in fact for the new State Pension woman must be born on or before 5 April 1953, and man on or before 5 April 1951. If you fall into this category of people, you will be able to apply for the state pension, which will give you access to your savings when you reach the age of 66. The amount you will receive will depend on your contributions.
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