Quite simply, a pension is a pot of money that you pay into with the aim of providing you with an income for later life or when you decide to retire.
There are different types of pensions, these include workplace, personal and State Pension.
Personal pensions are usually pensions you arrange yourself and are often used by people who are self-employed, not working or not eligible to join their company’s workplace pension scheme. They are always defined contribution arrangements but there is no Government-set minimum contribution level.
There are different types of personal pension. These include:
What is a workplace pension?
It’s a pot of money that you and your employer can pay into, that aims to provide you with an income for later life or when you decide to retire (you may also hear this referred to as a pension or workplace pension – it’s all the same thing).
One day, you’ll want to stop work or work less, and you will no longer have your salary to live off. You will still have bills to pay, and you’ll want to have a bit of a life, so your pension will provide you with an income to do this.
Workplace Pensions are usually two types. One type is a DC pension, and the other type is a DB pension. Defined contribution (DC) is the more common. This is where your money is put into various types of investment, such as stocks and shares and how much you’ll get in the future depends on how much is paid in and how your investments perform.
Defined benefit schemes, (sometimes called a final salary pension scheme), is a scheme that promises to pay out an income based on your service and how much you earn when you retire. Many defined benefit schemes have closed over recent years.