Trustnet Direct Retirement Programme | Page 19

PLANNING Types of pension Now concentrate! This is where the financial services industry has gone to town on trying to confuse people. There are many types of pension, from a personal pension to a company one, with many variants that all have their pros and cons. It’s easy to pay in to your pension and take little or no interest in it, only to find that, as you approach retirement, things haven’t gone to plan. If you have old company pensions from previous employers that aren’t final salary schemes, you can bring them in to one place and manage them yourself Group personal pensions Personal (contract based) Workplace / employer sponsored Defined benefit Unfunded Individual personal pensions Defined contribution Funded Not workplace There are many other types of pension, just to keep you bemused and confused – we explore the main ones over the next few pages. . . .... ......................................................................................... Occupational Final salary schemes tend to have valuable benefits that you should take advice on prior to switching out of ...................................................................... Occupational money purchase There are two main types of pension: defined benefit (or final salary) and defined contribution schemes ........................................................................................... ........................................................................................... Occupational salary related Key points .. .......................................................................................... The most generous pension of all is the defined benefit or final salary pension scheme, which nearly bankrupted the government and many big businesses. These offer around two-thirds of a member’s salary from retirement to death. If you have one of these, you should hang on to it as they have valuable advantages over every other type of pension. The most common type of pension now is the defined contribution scheme, where you (and your employer) contribute into a scheme that invests the money for you. You receive the proceeds of those investments at the point you retire, although now you can access all of this at age 55. Twenty five per cent is available tax free. . . . ..................... ... Page 19 .....