PLANNING
Types of pension
Now concentrate! This is where the financial services industry has gone to town
on trying to confuse people.
There are many types of pension, from a personal
pension to a company one, with many variants that
all have their pros and cons.
It’s easy to pay in to your pension and take little or
no interest in it, only to find that, as you approach
retirement, things haven’t gone to plan.
If you have old company pensions from
previous employers that aren’t final salary
schemes, you can bring them in to one
place and manage them yourself
Group personal
pensions
Personal (contract based)
Workplace / employer sponsored
Defined benefit
Unfunded
Individual personal
pensions
Defined contribution
Funded
Not workplace
There are many other types of pension, just to
keep you bemused and confused – we explore
the main ones over the next few pages.
. . ....
.........................................................................................
Occupational
Final salary schemes tend to have valuable
benefits that you should take advice on prior
to switching out of
......................................................................
Occupational
money purchase
There are two main types of pension:
defined benefit (or final salary) and defined
contribution schemes
...........................................................................................
...........................................................................................
Occupational
salary related
Key points
..
..........................................................................................
The most generous pension of all is the defined
benefit or final salary pension scheme, which nearly
bankrupted the government and many big
businesses. These offer around two-thirds of a
member’s salary from retirement to death. If you
have one of these, you should hang on to it as they
have valuable advantages over every other type of
pension. The most common type of pension now
is the defined contribution scheme, where you (and
your employer) contribute into a scheme that invests
the money for you. You receive the proceeds of
those investments at the point you retire, although
now you can access all of this at age 55. Twenty five
per cent is available tax free.
. . . ..................... ...
Page 19
.....