Today UK resident citizens who wish to set aside a sum for their future have a wide choice of pension plans available to them. The UK government has in fact created many different plans, each of which is designed to meet the needs of certain categories of people and workers.
A pension is a fixed income that will allow you to support yourself financially when you stop working. But what are the most important things to keep in mind when choosing a pension plan? Let’s take a look at them.
3 Important Things About British Pensions
- Retirement age: here is the first thing to keep in mind when choosing a retirement plan. The retirement age refers to the date on which the account holder will be able to access savings.
In the UK, this date has been set at 55 years old for most plans. Although it might seem like a very strict rule, it has been set up to guarantee you a considerable amount thanks to which you can support yourself financially when you stop working.
This way you won’t be tempted to withdraw and use your savings before then. However, if you are aged over 55, you should also know that it is possible to cash in small pension pots.
- When you open a pension fund, the Government will always give you its contribution through tax relief. This applies to all retirement plans currently available for British citizens.
- When you open a pension fund of any kind, your money will always be invested by the pension provider. This rule was set up to give your savings the chance to mature and grow over the years. Although it may seem a valuable option, this practice also puts your money at constant risk.
In fact, the amount you receive when you stop working will depend solely on the performance of the investments. As investments are unpredictable, it is possible that you will receive less than you deposited.
Why It Is Important To Plan Your Retirement Years
Before choosing your pension plan, it is important to think about the various aspects of your future. As a matter of fact, you should plan your retirement years carefully by taking into consideration your needs, identifying your goals, both from an everyday life point of view and economic one.
Where will you want to live when you stop working? Will you want to continue living in the same house or buy a new mansion? Will you want to move to a foreign country? Will you continue to financially support your children? These are key questions, whose answers will help you identify the pension scheme that best suits your needs.
How Many Pension Plans Are There?
As mentioned above, British citizens have a wide range of options when it comes to choosing the pension plan. Let’s have a look at the types of funds available.
The Workplace Pension
The workplace pension is one of the most popular choices in recent years, as it has been designed for employees.
In this case, the employee can always count on the support of his employer: as a matter of fact, you’ll both be required to deposit a small percentage of your salary, which will slowly build your pension pot.
The deposited money will then be invested: as already mentioned, the amount you receive will depend on the performance of the investments.
The personal pension
The personal pension, on the other hand, was designed for those who do not have an employee job. In fact, freelancers and self-employed workers will still be able to set aside a monthly sum to secure a substantial amount for the future.
This type of pension gives you the control over how much and how often you deposit. However, this type of pension scheme is not only for self-employed, anyone can decide to set up also a private pension aside from other pensions.
The State Pension
Lastly, there is the State pension. The latter was designed to ensure that people with at least ten years of contributions can set aside money for the future.
In order to be eligible to get the State pension, you must be a woman born on or before April 5, 1953, or a man born on or before or April 5, 1951.
If you do not fall into this category of people, you can always apply for the New State pension. Furthermore, the pensionable age for this pension scheme has been set at 66 years old.