Pensions: all you need to know

  • Pension rules what are they?
  • Are annuities still worth it?
  • Help with finding lost pensions
  • Your pension pot options
In this guide: The pension rules, how workplace, state & personal pensions work & retirement planning

Pensions Glossary

Discussion about pensions may often appear overly complicated and involved, not least because of the number of unfamiliar technical terms that are widely used.

The following jargon-busting glossary is our quick guide to some of the terms you are most likely to encounter:

  • State Pension
    • This is the pension to which you are entitled if you have made National Insurance contributions for a prescribed, minimum number of years;

      Although the earliest you may qualify for payments of a State Pension is 65 (60 for women), both of these are being raised in the very near future;

  • Personal or Private Pensions
    • Just as the term suggests, this is a private pension scheme, entirely separate from your National Insurance contributions and the State Pension which follows;

      Private or personal pensions are tax-free money purchase plans which you may set up independently of any scheme operated by your employer

  • Workplace or Company Pensions
    • Also called occupational pensions, these are run by your employer as part of the overall remuneration package you receive for the job;

      Both you and your employer contribute to a pension fund which becomes available for withdrawal at an agreed retirement age and the government also contributes to the benefits by way of tax relief on payments you make to your workplace pension scheme

  • Final Salary Pension Schemes

      Just as the term suggests, this refers to a once quite widespread type of pension scheme in which the amount of your pension is related to the final salary you were earning immediately before you took retirement;

      Although many are still in payment, it is increasingly rare for those in work to be offered any such scheme – simply because they are so expensive for pension funds to provide.

  • Money Purchase Pension Plans

      These do not rely upon your final salary at work, but instead relate directly to the contributions made to a pension pot by you and your employer;

      For that reason, they are also known as defined contribution plans;

      The amount of pension you eventually receive is determined by the total amount that has been contributed and the performance of the investments made by the pension fund managers

  • Stakeholder Pension Plans

      Stakeholder pensions are a specific variety of personal pension plan, to which you make your own private contributions;

      With a stakeholder scheme, however, there are government regulations limiting the amount of fees and charges that may be raised by the pension fund managers and other rules governing security of and access to the fund

  • Pension Release

      Also known as pension “unlocking” this typically refers to attempts to access and withdraw funds from your pension pot before you reach the age of 55;

      55 is the age at which you are legally entitled to access your pension funds, although the rules of a particular workplace, personal or stakeholder scheme may set the qualifying age somewhat later – say, 60 or 65;

      Although methods exist for accessing the future value of your pension fund before you reach the age of 55, there are frequent warnings – not least from the financial services regulator, the Financial Conduct Authority (FCA) - about the costs you may face in early release of the funds, including your tax liabilities. That is why seeking specialist pensions advice is always recommended.

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