Please note: the value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.
Here at Total Financial Services we understand that the number and variety of pension options can be very daunting. Our expert pension advisors can guide you through the pension maze and help you find the right product for your circumstances. As we are a totally independent company we can search the whole of the market for the very best product for our customers.
Pensions fall into 4 basic categories:
1. Personal Pensions (including AVCs and FSAVCs)
These schemes were set up to allow workers who were already in an occupational pension to pay extra in order to build up an additional pension pot. They were designed to be an addition to the workplace pension with benefits taken at the same time as the occupational pension. With this type of pension you pay in a certain amount of money per month and the funds are invested in stocks, shares and other investments. Your pension provider can claim tax relief at the basic rate although higher rate taxpayers can claim additional tax relief on contributions through their tax returns.
2. Self Invested Personal Pensions ( including Hybrid SIPPS)
Basically these pensions are like DIY pensions in that you can decide how your pension pot is invested. This type of pension allows more freedom and flexibility and can be managed online. The SIPP pension also qualifies for tax relief however set up fees, annual charges, fund fees and exit fees need to be taken into account with this type of pension.
Hybrid SIPPS are a halfway house between a traditional pension scheme and a SIPP. These are usually offered by insurance companies including AXA, Friends Provident and Legal and General.
3. Occupational Pension Schemes
This is when an employer organises a pension scheme for its employees. It can take the form of a trust run by trustees or it can be administered by a life insurance company. There are two types of occupational pension scheme, contributory- where you pay in a percentage of your salary each month or non-contributory where your employer makes all the payments on your behalf.
A Money Purchase or Defined Contribution scheme is where you build up your own pot of money within the scheme so your pension will be based upon how much is paid in, how long it has been invested, any charges incurred and the return on the investments.
Final salary schemes are regarded as the 'gold standard' in relation to occupational pension schemes as you are guaranteed a pension based on your final salary prior to retirement and the number of years that you have contributed. However the amount you receive is limited to two thirds of your final salary. Once again these pensions qualify for tax relief on contributions.
4. New Workplace Pensions
Auto-enrolment is a new government scheme whereby employers are legally obliged to enrol their employees into a pension scheme. In this type of scheme both the employer and employee are required to contribute to the pension.
Choosing the right pension is probably the most important decision you will ever make. By choosing IP Wealth Management to steer you through the maze of different options you can feel confident that our experts will help you make the right choice so that on retirement you can bank on having a pension that will support you and allow you to do the things you want to do.
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