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What are pensions?

A pension is contract for which a set amount of money is to be paid regularly to an individual following up from retirement. A pension is developed by an employer to benefit an employee, which is commonly referred to as an occupational or employer pension. The government, labor unions or other organizations may fund pensions also, an occupational pension being a form of deferred compensation usually coming as an advantage to the employee and employer for tax reasons. Many pensions contain an additional insurance aspect also, since benefits are often paid to disabled beneficiaries or survivors.

There are many different types of pensions we can review such as:

Personal pensions

A personal pension is an individual arrangement where your contributions are invested making your retirement income based on the performance of the annuity rates and the fund.

Stakeholder pensions

Stakeholder pensions are low cost personal pensions meeting Government standards to ensure they offer value for money, security and flexibility. This particular pension has capped charges at 1.5% for the first 10 years and 1% thereafter. Contributions can have low minimums and be flexible, normally being restricted to a few funds managed by the pension provider.

Self-invested personal pensions (SIPP)

An SIPP is a type of personal pension offering a larger range of investments compared to personal pensions and stakeholders. This wider investment provides more flexibility and can help reduce risk and enhance potential returns. This pension allows you to have control over how your pension fund is invested.

State pensions

There are two types on state pensions, a Basic state pension which is paid at a set rate by the state providing that you have made a sufficient National Insurance Contribution throughout your working life. The majority of people will qualify, although there are conditions surrounding this. The state second pension applies to employees who have earned over a certain amount and have been paying an appropriate National Insurance Contribution on the earnings. They will be entitled to an additional state pension also known as the state second pension.

Occupational pensions

An occupational pension is where employers can set up occupational pension scheme for their employees, this can be offered to both public and private employers.

Why review your pension?

Reviewing your pension can help determine whether or not the fund performance justifies the charges you are paying for your particular fund to be managed and if the level of risk is in fact suitable. If you are fully aware of market activity and the volatility of your pension funds it enables you to make adjustments and any necessary changes to ensure your retirement goals are supported by your fund. Receiving a pension and thinking ahead will help stabilize you and your future after retirement helping you have an easy, simple life without worry and without strain. A regular review can support you in your retirement goals and ensure that you are in the best position possible once retired.