Different Pensions Available in the UK
Different pensions available in the UK
In the United Kingdom there are different way to gather money and generate your income source for after the retirement. The pension schemes available for UK citizens are three: the State Pension, the Workplace Pension and the Personal Pension. Knowing the basic characteristics of each and every type of savings plan will help you understand more about your own savings and choose the one that better suit your current and future situation. Depending on your professional and personal status you might benefit of three of these options which you can also combine together.
The first kind of pension we go through is the one that is arranged by your employer. Working for a company has the advantage of providing a source of income after your retirement, based on defined contributions plans. The Workplace Pension is an option you do not have much control on. In fact, is the company you work for in charge of choosing the provider that will manage the contributions. The amount of money you will receive depends on the salary and the way the portion dedicated to the pension was invested. It can also vary based on the performances over time of the chosen assets. Based on your profile, the closer you get to the retirement, the advisor might modify the investments schemes, in order to reduce the risks and keep the capital safer.
Personal Pension is the second type you can have access to if you live in the UK. This is similar to the previous pension, with the exception that it is your responsibility of setting it up. You won’t have to invest your own money directly, screening the markets, buying and selling stocks. Being your individual pension, you can select the financial advisor you prefer and elaborate with him (or her) a specific plan, customised on your situation and goals. You can decide how much money you want to allocate in it, if investing in a shorter or longer term and your willingness to take risks and face the volatility of the markets. Another advantage is that you can decide to arrange a unique payment in one transaction or install regular contributions, for instance on a monthly basis.
Basic and new State Pension
The last type of pension accessible for UK citizens it the one given by the State. It is a regular payment that the government is providing once the State Pension age is reached. In order to receive it you will need to claim it, and the amount arranged depends on the individual working history and also on the National Insurance record. It includes the record of contributions that you pay while you are an active worker and the ones credited to you when you are not able to work. This file also consists of spontaneous contributions you might want to deposit to fill some gaps related to times in which you do not work. If you are a man born before 6 April 1951 or a woman born before 6 April 1953, you can claim the basic State Pension, whose maximum amount can get to £137.60 a week. If you are a man born on or after 6 April 1951 or a woman born on or after 6 April 1953, you can claim the new State Pension, whose maximum amount can get to £179.60 a week.
Is it the right time to plan your retirement?
The path for financial independence passes by these three options. No matter at what career stage you are or how old are you, it is always the right time to start thinking about retirement. How much would you need to retire at 55? Or younger? There is no easy answer, since it basically depends on your lifestyle. Consider you may need an amount that is between half and two-thirds of your yearly salary. Either you plan an early retirement or you are simply gathering information about your economic future, take into account you have these three pensions available if you live in the United Kingdom. Bear in mind it is never too early to save money and to do the numbers for your future. If you feel a little behind your pension target up to this moment, you could consider to make a plan and put that into practice.