UK residents have a wide choice when it comes to retirement plans. One of the most common is the state pension, which consists of a periodic payment made by the Government based on the holder’s previous National Insurance contributions.
In order to be eligible for the state pension, you have to meet some strict requirements. For instance, only women born on or before 5 April 1953 can open this kind of account.
As for men instead, they must be born on or before 5 April 1951. However, if you’re born after these dates, you’re eligible for a similar kind of scheme, which is called “new State Pension”. In fact, this particular kind of trust doesn’t take into account when you start claiming your pension, but when your reach the retirement age instead.
Another important thing to keep in mind is that unlike all other pensions, which give holders access to money when they turn 55, the retirement age of the state pension has been set at 66. Another requirement you must meet to be considered eligible for the state pension is having at least ten years of contribution.
As a matter of fact, the monthly payments you get when you open this kind of account are based solely on your contributions. You also have to option to claim your pension and keep working. You should also know that in the UK your retirement monthly payments won’t start until you claim your pension.
As a matter of fact, deferring state pension could be a good idea to increase the amount you get when you’ll decide to finally claim it. If you’re not sure that a state pension will be enough to sustain you once you’ve stopped working, keep reading: in the following paragraphs we’ll show you the other pension schemes available for all UK residents. This way you’ll be able to figure out which one is the best for your situation.
The Other Pension Schemes Available For UK Residents
The state pension isn’t the only pension scheme available for British citizens. As a matter of fact, you can choose between a great diversity of different plans, each of which has been designed to meet the needs of certain categories of people. Let’s have a look on the trusts available.
The Workplace Pension
The most common type of pension scheme available for UK residents is called workplace pension, which consists of a scheme specifically designed for employees. In fact, by choosing this trust you’ll be able to count on the contribution of your employer who will monthly deposit a minimum amount to help you build your pot. As a matter of fact, all British employers are required to contribute to their employees’ retirement plans. You will also contribute by depositing a small percentage of your salary. Lastly, you’ll be able to count on the contribution of the Government, which will always apply for tax relief.
This type of pension comes in two different schemes: the first one is called the defined contribution pension scheme and it consists of a monthly payment made by your employer to help you build your fund. The pension provider will then invest your money. You should know that this means the amount you get will solely depend on the performance of the investments. The second scheme available is called the defined benefit pension scheme.
In this case, you’ll be able to access a pre-established sum as soon as you reach your retirement age, which for this pension is set at 55.
The Personal Pension
The personal pension is a particular kind of scheme you can arrange yourself. It has been designed for independent workers who can’t count on an employer’s contribution. By opening this kind of fund you’ll be able to choose the pension provider you prefer, and how much and how often to deposit on your trust.
Just like any other type of retirement plan, when you deposit money on a personal pension it will be invested by the pension provider. Once again, this means that the amount you get will also depend on the performance of the single investments and that you might end up getting less than expected.
Rules That Apply To All Schemes
Even though every trust available is different from the others, there are a few rules that apply to every single one of them. The first example of this is that no matter what pension fund you choose to open, you will always be able to count on the Government’s support for your pot, which as mentioned above will always contribute through tax relief.
Also, whichever retirement plan you open, you won’t be able to withdraw your money before the time. As a matter of fact, a rule has been set to prevent holders to withdraw the money before they reach their retirement age, currently set at 55 years old for the workplace and personal pension and at 66 for the state pension.
Although it might seem like an unnecessary strict rule, it has been set by the Government to help you collect a substantial amount to which you can live on when you stop working. Lastly, you should never forget that the pension provider will always invest the money you put in your fund.
This means that the sum you get with a personal or private pension when you stop working will be unpredictable and solely based on the performance of the investments.
Why You Should Plan Your Retirement Years
Planning your retirement years is as important as choosing the right scheme for you. To carefully plan your years after work does not only mean having a solid economic strategy for your future but also being able to identify your goals and ambitions.
In order to do that you should ask yourself some very important questions, such as how much will you need to retire at 55? Will you want to move to another country? Will you need to financially support some of your family members? Answering these questions is crucial to choosing a good plan and trying to ensure a more stable economic future for you and your loved ones. Even though your ambition could change over time, you’ll be setting a wise plan to have the freedom to spend your retirement years as you prefer.