When the word pension is mentioned it’s easy to think about burying your head in the sand however, pensions are a lot easier to understand than you might think.
Basically, there are 3 types of pension:
The Government State Pension
This is a pension paid for by the Government and most people will be entitled to some sort of income as they reach retirement. It is a secure income for life and increases by at least the rate of inflation each year.
Your entitlement is built up by your level of National Insurance Contributions that are made throughout your working life. Contributions may also be made in certain circumstances such as bringing up a family full time.
The current rate for the new State Pension is £155.65 per week however the amount you will receive will be dependent upon your National Insurance Record. You can begin taking this pension once you reach State Pension age.
Defined Benefit Pension
There aren’t so many of this type of pension scheme on offer as there were some years back and they’re most likely to be found being offered to those workers in the public sector or a large company.
It is salary related and therefore what you’ll receive in retirement will be dependant upon your earnings as well as how long you’ve contributed to the scheme. The income you receive in retirement will depend on how your pension scheme works, it can be based on the income you’re receiving at the time you’re approaching retirement or alternatively it may be an average of what you’ve earned whilst employed with the company.
With this type of pension scheme, your contributions are directly linked to what you save into the pension as well as how the pension scheme investment has performed. There are no guarantees on what your income will be with this type of scheme yet these are the most popular type of pension scheme offered to employees and private individuals in the country.
If you’d like to know more about pensions as well as what type of pension you may have, maybe you’s like to know what your choices are, why not talk to Simply Financial Advice? We can help with your questions about pensions and we offer advice that is tailored to you and your needs. Give us a call on 0800 044 5733 or complete the form below and we will be in touch as soon as we can.