What You Need To Know About Pensions

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by: BSM
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Date: Sun, 30 Jan 2011 Time: 9:42 AM
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Pensions are a type of financial product that provides you with a way to save up a lump sum towards your retirement. When you do stop working you will be able to use this lump sum to by annuities (these provide a life long income) or invest into new ventures. Pensions are designed to help you save up slowly throughout your working life. Typically you would pay in a small amount of money each month or a lump sum annually towards building up your pensions. Some pension schemes will have maximum yearly payment amounts and minimum contributions so it is important that you take the time to look around and find the right option for your goals and circumstances.

Private and Employer Pensions

You can take out a private pension any time you want to up until you retire. These are widely available from a large number of financial institutions such as banks, building societies and dedicated pension providers. Your employer may also be offering special pensions schemes which you can opt into and these can be run alongside any private pensions you may wish to set up (or already have). It is important that you compare employer policies with private ones before you sign up to make sure they can offer you the best options for your saving plans. In the future all employers will have to offer a pension scheme for their employees (no matter what size the business is). However although these employee pension schemes will offer some good benefits remember you are not obligated to have them if you would prefer to run your own private pension plans instead.

Paying into your Pension

The majority of pension schemes allow you to pay in as much as you want. You can do this through scheduled monthly payments and also one-off lump sum payments. Some pension schemes may limit how much you can put in each year though so do check this first before you sign up. An important point to note is that you will only receive tax relief from the government on up to 100% of your earnings. This means if you earn £18,000 per annum but put £20,000 into your pension then you will not get tax relief on the additional £2,000 you have paid in.

Getting More Help

If you are having trouble planning for your future then you should seek out some professional pension, investment and savings advice. A Pension Advisor can provide you with all the information you need on saving for your retirement. They can help you to compare products, find the best deals and understand what funds you need to put in place for when you retire. The Pensions Advisory Service is another good source if you have any questions on pensions and this is an independent and non-profit organization.

About the Author

John Hughes has been writing within the personal finance and Pensions arena for the last 7 years and is passionate about people saving for thier future.