Private Pensions and Occupational Schemes form the backbone of many UK investors' retirement planning. You may qualify for the Basic State Pension, a workplace pension, pay into a personal pension or have a combination of pensions in place.
It is important to understand how the investments in your pensions fit into your broader strategy. You should ask yourself the following questions when evaluating your pension funds:
Here we look at the main types of pension funds and provide information on how each might work for you.
Full pension benefits are available to anyone who has worked in the UK and made qualifying National Insurance Contributions (NICs) for 35 years. How much you will receive and what your pension age is will depend on your date of birth, gender and National Insurance record. If you lived and worked outside the UK and did not keep contributions up to date, you may not qualify or your entitlement may be reduced.
You can check the amount you can expect to receive on the government’s website.* Would this estimated benefit be enough for you when you retire? You may need more than just the State Pension to fund your lifestyle in retirement.
Under the Pensions Act 2008, employers have a responsibility to ensure automatic enrolment of eligible employees into a workplace pension scheme, with both employee and employer typically making contributions unless the employee opts out.
Workplace pensions can be either defined benefit or defined contribution schemes or a hybrid. Defined benefits provide a specific amount of money to you after retirement based on a formula or rate of accrual that uses the length of your membership in the scheme and final salary to work out your pension.
Defined contribution workplace pensions provide a more variable benefit after retirement—depending on how the investments and assets within the plan have performed. Some of these pension schemes allow you to select the type of investments that make up your fund. For more information, you should contact your employer's pension scheme provider.
Like occupational Defined Contribution schemes, Private pension plans allow planholders the flexibility to plan and invest on their own terms and to enjoy the benefits of compounded investment gains. This is especially beneficial for those that commence contributions earlier in life.
If you are not eligible for a workplace or company pension or are interested in saving extra funds above the Basic State Pension for when you retire, a private pension, such as a stakeholder, personal pension or self-invested personal pension (SIPP), may be a useful vehicle for you to achieve your goals.
Understanding pension funds and how much income will be generated can be difficult—a pension adviser can help you analyse most of your pensions and planned income sources to help you plan how you will meet your longer term financial goals. At Fisher Investments UK, we can help you with an initial review of your current portfolio and pensions, check how the investments are working for you and advise whether a pension transfer may be a suitable course of action.
Fisher Investments UK can help you plan confidently for your retirement. Contact us today to learn more.
Investing in financial markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance neither guarantees nor reliably indicates future performance. The value of investments and the income from them will fluctuate with world financial markets and international currency exchange rates.
