There are lots of different types of pension schemes with the most common types being:

 

Occupational pension schemes

These schemes are also called company pension schemes. It's a scheme set up by an employer to provide pension or death benefits for its employees. An occupational pension can provide pension benefits on a money purchase, defined benefits, cash balance or hybrid arrangement basis. The two most common arrangements for occupational schemes are:

• defined benefits
• money purchase

If you leave your job you'll normally have to stop building up pension savings in your employer's scheme.

 

Personal Pension schemes

A personal pension scheme is set up and run by a regulated financial organisation such as a bank or insurance company. You can pay regular or lump sum contributions to the scheme, who will invest it on your behalf.

Anyone can start paying into a personal pension scheme - you don't have to be in employment. If you're an employee your employer may pay into your personal pension scheme - but they don't have to.

Personal pensions are money purchase arrangements so the amount of pension you'll get depends on:

• the amount of money paid into the scheme
• how well the investment funds perform
• the 'annuity rate' at the date of retirement - an annuity rate is the factor used to convert the 'pot of money' into a pension

Your personal pension scheme provider should send you a statement each year telling you how much your pension pot is worth.

 

Stakeholder Pension

Stakeholder pensions are really a type of personal pension. The only difference is they have to meet a number of standards which include:

• a 1.5 per cent limit on annual management charges
• they have to accept contributions as low as £20
• you can stop, start and change your contributions whenever you like

 

There are other types of pension scheme that come under the occupational or personal pensions umbrella and the most common are:

• National Employment Savings Trust (NEST)
• group personal pension (GPP)
• self invested personal pension (SIPP)
• free standing additional voluntary contribution scheme (FSAVC)
• buy out policy - also known as deferred annuity contract or section 32 policy
• small self administered schemes - SSAS

 

For further information on pensions please contact your local Financial Advisor.