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Just what is a pension?
Four main types of pension exist and we take a look at so you can see what each comprises of so you can compare pensions. Those four are “the personal pension”, “the company pension”, “the stakeholder pension” and “the state pension”.
A pension is a regular income given after retirement in normal circumstances, usually with a guaranteed annuity.
Planning your retirement is important as you will require a means of living when you have finished working. Usually a cash balance is built up over a long period of time with said cash balance given out upon retirement. Pensions and benefits that come from an employer are known as employer pensions or occupational pensions. Unions and other organisations can also provide pensions.
This is whereby a person agrees with a pension provider to save money for their retirement. The funds will then be managed by the pension provider depending on the choices made by the person.
Company or Occupational pensions are a form of deferred compensation. Company pensions are usually positive for you and your employer (or your employee if you are a business owner) as you will both save money on tax.
Stakeholder pensions are a modern personal pension introduced to limit fees.
Basic state retirement pensions to a single person are approximately 3k per annum in the UK. This is lower than the income support threshold. Income support is need for many pensioners with no other income means. Current taxpayers pay for pensioners today. In the future state pensions will not be able to do this for the vast majority of the country so the government heavily encouraging other forms of personal pension.
It is best to use a Financial Adviser
Financial advisers are legally obliged to give the best advice so we 100% recommend that you talk to one. They will sift through the market and will understand all the features of the pension plans available to you.
3 Tips To Successful Pension Plan Selection
It is worth shopping around as a pension is one of the largest acquisitions you will ever make. All pension plans have differing features and benefits so you need to make a wise choice. Do this by selecting a financial adviser, who will research the market. An IFA will compare plans and take you through the process so you select the right pension for you.
Flexibility and Charges
These are key aspects of the pension plan to consider. Ask your IFA to explain to you the ins and out of each plan put forward for consideration.
Consider The Following
You really need to consider how much money you need to save to enjoy the standard of living you require when you are of a retirement age, your hobbies and interests and the potential medical needs you may have.