There are so many different types of pensions available nowadays for UK citizens who wish to set aside some money for their future. This is what pensions are for: to guarantee every citizen an income thanks to which they will be able to live in total serenity when they stop working. In the UK, pensions have some rules that unite all the schemes available: the first rule you need to keep in mind is that of the retirement age. This is an age before which you will not be able to access or withdraw your savings. This rule, albeit strict, was designed to save you from the temptation to withdraw ahead of time and to try to guarantee you a substantial amount thanks to which you can live on when you stop working. Secondly, you can always count on the support of the British Government which will contribute to your future through tax relief. Plus, whichever plan you choose, you will always enjoy a satisfying number of tax benefits. However, you should remind that when you deposit money into a pension fund you are basically investing it. In fact, the capital present in your trust will be invested by the pension provider. This practice was designed to give your money the opportunity to grow over time. While it may seem convenient, you should never forget that investments are risky and that constant market fluctuations only make the outcome of your every move unpredictable. In fact, you must always be prepared for the eventuality of getting less than you hoped for. If you are confused about how pensions work in the UK and you are wondering how much will you need to retire or when will you be able to retire if you were born in 1956, asking for financial advice will help you find answers to your questions. Moreover, with the help of an expert, you can have the opportunity to better plan your retirement years according to your own financial situation and needs.
Anyway, let’s have a look at the many plans available in order to have a general overview of the pension’s schemes.
The workplace pension
The most common scheme currently available for British citizens is the workplace pension, a plan designed specifically for employees. By opening a workplace pension, you and your boss will have to deposit a small percentage of your salary monthly to build your pension pot. In the UK, all employers are required to contribute to the future of their employees by depositing a minimum amount. Furthermore, in this case you can count on the government contribution that will earn you tax relief.
The personal pension
If, on the other hand, you are a freelancer and you work on your own, you should opt for personal pension. This scheme was designed to help self-employed people build a pension pot. In this case, you can freely choose your pension provider and decide how much and how often to deposit.
The state pension
Finally, there is the state pension, which is a periodic payment by the government based on your previous contributions. To obtain it you will need to prove that you have at least ten years of contributions. You must also have been born before or April 5, 1953 if you are a woman, and before or April 5, 1951 if you are a man. If you were born after these dates, you will instead be eligible for the New State Pension. In both cases, the retirement date is set at 66 years.