You may have saved into a variety of occupational pensions through your employer, your own business or by setting up a personal pension.
Understanding the pension contributions you have already built up whilst working is a critical step when planning for your retirement. And it’s also important to keep track of how much you are currently contributing.
We can help you understand more about what you have, and what your entitlement to a better retirement income could be, through using our online tools.
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Key things you need to know about your pension -
When planning for your retirement it will help you to know the key information about all your pensions such as:
- Which pension providers are your pensions with?
- When does each pension provider expect you to retire?
- What type of pension(s) do you have with each provider?
- What is the current value of all your pension plans?
- What is the estimated value of your pension plans at retirement?
- What income will your pensions pay you when you retire and what are the features and benefits attached to that income?
- Does the pension have a "guaranteed annuity rate"?
- Does the pension have a "guaranteed minimum pension" option?
What are the different types of pensions? -
There are several types of pension and they fall into the following main categories:
- State Pension - your National Insurance contributions pay for your state pension.
- Personal pension - usually a pension that you have saved into yourself, sometimes your employer may have contributed to this pension.
- Occupational pension - a pension scheme that is offered by your employer with either a defined amount of money paid in, usually monthly, or alternatively based on your salary and service. Both you and your employer will normally make contributions to such schemes.
What are the different types of personal pensions? -
You build up a pension fund by investing your and/or your employer's pension contributions with an insurance company. Over time, your contributions build up to provide you with a pot of money that you can use to generate an income in retirement.
Stakeholder Pension (available since April 2001)
These are low cost, flexible pensions, set up by either yourself or through an employer, where providers are restricted in what fees they can charge you. The pension is transferable between providers (at no cost) and schemes can accept smaller contributions, though you may have restricted investment options.
Personal Pension (available since 1988)
These offer more investment choice than stakeholder pensions, but sometimes come with higher charges.
Retirement Annuity Contract (available prior to 1988)
These work in much the same way as personal pensions but have both different retirement limits and tax-free lump sums.
(Free Standing) Additional Voluntary Contribution Scheme
This is used by people in occupational pensions to save additional money outside of the scheme.
Self Invested Personal Pension
This is a type of personal pension brought in to cater for sophisticated investors. The product generally has higher charges but provides access to a multitude of investment options.
Section 32 Buyout Plan
These were introduced to allow people to transfer their benefits out from an occupational scheme and were sometimes referred to as “pension transfer plans”. These could contain a benefit called a "Guaranteed Minimum Pension".
What are the different types of occupational or workplace pensions? -
These are pension schemes provided for you by your work and generally there are two types:
1. Defined Benefit scheme (also known as a 'final salary' or 'average salary' scheme)
This type of pension pays you a set income based on your service and your salary from a set retirement age. You may be able to retire at a different time by contacting the scheme administrator.
If you are a member of a defined benefit arrangement then the best way to learn how it works and what benefit you will receive in retirement is to study the scheme explanatory booklet or contact the trustees of the arrangement, who will be able to provide you with additional details.
If you receive an invitation to transfer out of a defined benefit scheme, please seek professional advice before accepting such an offer as what may seem attractive now could cost you dearly in retirement.
2. Defined Contribution scheme (also known as a “Money purchase scheme”)
Members of these schemes build up a pension fund by investing personal and/or employer contributions during their period of membership.
These contributions build up over time, to provide the member with a pot of money that they later use to generate a retirement income. It is essential that you consider all the ways you can convert your pension savings into an income and then shop around for the best deal before making your final decision.
Money purchase schemes include most personal pensions and stakeholder pensions, including those arranged through your employer.
You should check whether your pension has a guaranteed annuity rate or other form of guarantee, and if you’re in any doubt ask your pension provider(s). These guarantees will often provide you with an income for life much higher than you might normally get. If you decide to move your pension pot elsewhere or use it other than to take an income you may lose these valuable guarantees.
How can I find details of my lost pensions? -
If you think that you have lost track of some of your pension savings from previous employment or self-employment, try contacting your employer in the first instance. If they can't help then try the Pension Tracing Service, which could help you track your pension.