Pension Types – Find the right pension for you
Setting up your pension is arguably the most important financial decision of your life. The pension type you choose from the many pension types available will influence the development of your pension fund, and therefore largely affect your income in the latter decades of your life. Here are the main types of pension schemes, please click on the links below to find out more about each.
Private pension plans and personal pension plans
Private pension plans are also known as personal pension plans. These are the main types of pensions set up and held by the individual, as a personal investment for retirement:
Stakeholder pensions
Stakeholder pensions are the standard pension type, offering a basic pension suited to the general pension saver. While we generally think of pensions as a savings option for adults, it is now also possible to set up a child stakeholder pension, which is a children’s pension designed for long-term investment for your child.
SIPPs
SIPPs or self invested personal pensions are the most flexible, complex and costly of the pension types, offering unlimited access to all funds, and capable of holding many investment types and also commercial properties.
Global pension plans
Global pension plans are types of pensions designed for those working abroad, or moving from country to country in their career. They are based offshore and the expatriate holder can save into the plan from any location or series of locations worldwide.
Company pensions
Company pensions are those organised and provided by your company or employer. Here are a few types of company pension:
Defined contribution pensions
Defined contribution pensions, also known as money purchase schemes, are possibly the most common types of pensions in the workplace. With these types of pension schemes, the employee sets the level of his or her contributions to the scheme.
Final salary pensions
Final salary pensions are company pensions where the level of pension income is guaranteed, because it is calculated by your salary at the end of your career, and your number of years of service.
Protected rights pensions
Protected rights pensions are a pension type for investing National Insurance contributions rebated to those who opt out of the government’s second state pension.
Salary sacrifice pension
Salary sacrifice pensions may be worth considering, in certain situations. For example, it could be to your advantage to sacrifice part of your salary, and pay it into your pension, rather than move on to a higher marginal tax rate.
Teacher’s pension
Teacher’s pensions are administered under the Teacher’s Pension Scheme (TPS) and are a type of final salary pension scheme.
Government or State Pensions
State pension benefits are provided by government, and are an entitlement funded by the National Insurance contributions we make during our working lives. They consist of various elements.
The Basic State Pension is an entitlement based on National Insurance contributions. The full basic state pension is available to those who have made 30 years of NI contributions, although those with less qualifying years can have a partial entitlement. State pension for women is generally the same as that for a man.
The State Second Pension or S2P is also known as the Additional State Pension, and was formerly known as SERPs. We work up an entitlement to the state second pension during our working life, with the exception of those who are self-employed. The state second pension is generally given, in addition to the basic state pension, to those who have no company or private pension.
Pension credits are an additional top-up to the basic state pension, and are available on a means-tested basis to those who do not have a substantial income or savings besides the state benefits.
Pension types – ways to manage your pension
Once you have set up one of the types of pension schemes listed above, there are a few strategic decisions you may have to make, in relation to your pension, over the years.
We recommend that a pension review should be done every six months, or at least annually, to ensure that the investment funds where your pension is invested are performing well, and that they still reflect your personal risk profile.
Have your pension reviewed by a principle First pension adviser- call 0800 678 5929 to arrange your consultation.
You may wish to work with us to calculate to evaluate your early retirement options - invaluable knowledge, even if you are not yet thinking of taking them up!
Pension and divorce
Pensions and divorce advice is crucial in the event of the break-up of your marriage. Find out more here.
Deferred pensions
Advice on deferred pensions will let you know what to do if, for instance, you are changing jobs during your career. You will have to consider deferring or ‘freezing’ your pension and starting a new one in your new job, or taking your pension with you, through a pension transfer.
Pension planning to manage all pension types
We can provide a pension plan, personalised to your specific needs, which will give you an accurate idea of how much you’ll have to live on in retirement.
You can also use our online pension calculator to make some useful calculations to see if you are saving enough into your pension. You can enter the pension income you want in retirement, and see how much you need to be saving today, to achieve that goal.
Would you like a personalised pension plan? Please call 0800 678 5929 to speak to our pension advisers or get pension advice here
