Over 50% of us in the UK aren’t saving for rerirement at all or saving enough to get the standard of living we would like after we have retired. This being the case, we have some choices – leave things as they are and hope for the best, plan to retire later, or start to increase our savings for retirement.
A pension is the best and most effective way of saving for retirement and has a few advantages that enable your savings to grow quicker than other areas of investment may not.
A pension is basically a long term savings plan on which you get tax relief on your contributions. Your contributions are invested so that they grow over your working life and then provide you with an income when you retire. If you put your money into pension scheme, the money that you would have paid on it in tax is put into your pension as well.
The government has introduced legislation designed to help people save more for their retirement. Employers must start to enrol their workers into a workplace pension scheme if they are not already in one. It’s called ‘automatic enrolment’ and is gradually being made compulsory for all employers.
When you retire, you can take 25% of your pension fund as a tax free lump sum. The rest is used to provide you with an income (which is taxable).
There are many different types of pension scheme and many different terms associated with them. The items below are a few of the types and terms you ought to know about.