Types of UK Pensions

The United Kingdom has a wide variety of pensions available for its individuals, with distinctive attributes and benefits. It is important to understand these varied types of pensions to make an informed decision on which pension is correct for an individual. The different kinds of pensions available are:

1. State Pension: States pensions are recurring payments made by the government to individuals that have crossed the State Pension age, currently set at 66 years. The amount an individual received will depend on the National Insurance contributions made as well as the number of years that have been paid into the system.

2. Workplace Pension: This kind of pension depends on the scheme put in place by an employer for its employees. It is a requirement for employers to provide workplace pension schemes and also enrol their eligible employees automatically. Depending on the type of pension, there are some schemes where both the employee and employer contribute.

3. Personal Pension: A pension set up by an individual for themselves is known as a personal or private pension. An individual will make regular contributions to this pension fund, and this money will grow over time. There is an extensive range of investment options available depending on risk appetite as well as individual needs.

4. Self-Invested Personal Pension (SIPP): A SIPP is a kind of personal pension that gives an individual broader control over their investments. One can choose from a variety of asset classes such as stocks, shares, and property. SIPP is appropriate for experienced investors, thus one should seek out aid from financial advisors on matters such as this.

5. Stakeholder Pension: A stakeholder pension is a pension scheme wherein the aim is to keep the investment simple and cost-effective and is in most cases offered by employers. Stakeholder Pensions are beneficial for new investors as they have limits on charges as well as default investment strategies.

6. Annuity: This is a kind of pension which offers a regular income for life. An annuity can be purchased with pension savings, and this will then provide a guaranteed regular income for the rest of an individual’s life.

7. Defined Benefits Pension: A DB pension scheme also comes under workplace pensions and guarantees to provide a regular income during retirement. This income depends on factors such as the final salary that an individual receives as well as the number of years they have worked for their employer.