UK Pension Types

State Pension

The State Pension is a regular payment from the government that you receive when you reach State Pension age. It's based on your National Insurance contributions and provides a foundation for retirement income.

Basic State Pension: Based on your National Insurance record, this pension provides a set amount based on qualifying years of contributions.
New State Pension: Introduced in April 2016, it's based on your National Insurance contributions but requires at least 10 qualifying years to receive any amount and 35 years for the full amount.

Defined Contribution Pension

Also known as a 'money purchase' pension, in a Defined Contribution (DC) pension, the amount you receive in retirement depends on how much money has been paid into your pension pot and how it has been invested.

Employer and Employee Contributions: Both the employer and employee contribute to the pension pot, which is invested in various funds chosen by the pension holder.
Flexibility: Offers flexibility on how you access your pension savings after the age of 55, allowing you to take up to 25% tax-free and the rest as taxable income or as a series of lump sums.

Final Salary Pension (Defined Benefit)

A Final Salary Pension is a type of Defined Benefit (DB) scheme. It promises a specific income upon retirement based on your salary and years of service with an employer.

Guaranteed Income: The pension amount is typically based on a percentage of your final salary for each year of service.
Less Common Now: Fewer companies offer these pensions due to their cost and longevity risks, but they still exist for some employees, especially in the public sector.

Self-Invested Personal Pensions (SIPPs)

SIPPs are a type of personal pension that allows you to have greater control over your investment decisions.

Investment Flexibility: You can choose a wide range of investments such as stocks, shares, investment trusts, and commercial property.
Tax Benefits: Contributions to a SIPP benefit from tax relief, and the invested money grows tax-free.

Each type of pension has its advantages and considerations. It's important to understand them thoroughly and consider seeking financial advice to make informed decisions about your retirement plans.

Understanding UK Pension Types

Pension Pages

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In the UK, various pension types exist, broadly classified into private pensions, workplace pensions, and the State Pension. Your eligibility for or the type of pension scheme you possess typically hinges on your individual circumstances.

If you’ve moved jobs or changed address, you might have lost pension pots waiting to be found. We can help you track yours down.

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Pension Location

It’s important that you’re in control of your pension savings - particularly as you approach retirement. Depending on your needs and the kind of pension you have, it could make sense to consolidate and transfer to one easy-to-manage account.

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Pension Consolidation

Pension Wise

Pension Wise is a free, impartial government service for anyone aged 50 or over, with a UK based personal or workplace pension.

It can help you understand what type of pension you have, how you can access your savings and the potential tax implications of each option. But it isn’t financial advice.

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