Pension Definitions and Pension Lump Sums
With a steady stream of information, many of us are still uncertain what a pension really is and furthermore, what options are open to us when talking of preparing for our retirment. In essence, there are 2 types of pension:
A ‘Personal Pension Plan ‘ is started by you as an individual and can be run by your choice of provider “a bank, an insurance company, pension provider or other specialist firm. This will customarily be financed only by you, and the investment strategy is under your control right through your life.
The 2nd is an ‘Occupational Scheme ‘ and is prepared by your employer. Here, the primary control at least rests with your employer “and in the case of defined benefit schemes, so does the investment strategy. However , they’ll also normally make some (or maybe even all) of the contributions for you. The proceeds nonetheless always remain with you, even if you resign from that job.
In the wake of high profile scandals, rules ensure employers have no access to the assets of your pension fund irrespective of who set it up. A board of trustees run the assets for you, separate from any company, and this board is legally bound to designate advisers, take any investment decisions which haven’t been otherwise delegated to yourself and also keep both the financial and member records up to date on your behalf.
While putting away cash every month into a pension can sometimes appear impractical given the current financial times we are living in, we do all dream of a work free life, spent with friends and family and of course, on holiday. By planning your retirement early on these dreams can be achievable, as the small amount you put away now will supply you with a steady income once you choose to retire.
Also worth pointing out is that when you reach age 55 you are entitled to take up to 25% of your complete allowance amount completely tax free (though this will have an impact on your potential income in retirement). Taking an early pension lump sum such as this will definitely help you on your way to making your retirement dreams come true.
Info thanks to Adviser Hub. Before you make any decision with regards to getting an unsecured pension or taking an early pension release, we do recommend that you complete a comprehensive pension review with the help of a certified pensions adviser.
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