Facts about Pensions

Pensions and Stakeholder Pensions

A pension enables people who have retired from work to have enough money to live on. There are various types of pension available. One is the Basic State Retirement Pension. This type of pension currently becomes available to women when they reach the age of 60 and men when they reach the age of 65. The amount received for a state pension depends on how much National Insurance has been contributed. People who have paid full contributions for 90% of their working life will receive a full basic state pension.

Another type of pension is the personal pension, where people can save money for their retirement by making an agreement with a pension provider. The pension provider will invest the money that is saved and its value will increase. People may wish to use a personal pension to supplement their basic state pension.

There are also occupational pension schemes available. Occupational pensions can either be contributory or non-contributory. The employer can either make all the payments for the occupational pension or employees can choose to make a contribution in addition to the employer’s payments if they wish. Employees who do not feel they are getting enough from their occupational pension scheme can make additional contributions to increase their pension benefits. These contributions are known as AVCs (Additional Voluntary Contributions). Some small companies may not offer a pension scheme, so employees may wish to take out a personal pension instead.

There is also the stakeholder pension. This is a type of personal pension, but is much more flexible than the usual personal pension. People who are saving up for a personal pension have to pay a number of fees, such as set-up fees, whereas the stakeholder pension offers lower charges or no initial charges at all. The best way to get a stakeholder pension is via an Independent Financial Advisor. Since the charges with a stakeholder pension are lower, the commission fees for the IFA may be lower, which makes the stakeholder pension a more ideal option.

Stakeholder pensions are also ideal for people who are self-employed. They are aimed at people on moderate earnings and can be used in addition to an occupational pension scheme if the employee’s income is lower than £30,000. It is possible for a person to have more than one stakeholder pension if they wish.