What is a retirement scheme? How to choose the right one for you? In the United Kingdom, pensions have been designed to secure a more stable financial future for when you stop working. They are long-term savings schemes intended to provide you with an income to which you can live on your future days.
Today, British citizens have a wide choice when it comes to choosing the most suited plan for their situation. In fact, the UK Government has designed a great range of trusts in order to meet the needs of as many people as possible. Moreover, every plan available comes with several tax and contribution benefits. Although every plan is different from the others, there are some common rules apply to all of them.
In fact, when putting your funds on a pension you won’t be able to withdraw it until you reach your pensionable age, which for British citizens has been set at 55 years old. However, in some particular cases withdrawing pension early will be possible by paying a penalty fee.
Furthermore, when it comes to putting money in pension trusts, you should also know that your capital will be invested by the provider. This means that the amount you get will be unpredictable and subject to market volatility, and the risk of ending up with less than expected is always there.
The different types of retirements schemes available for UK residents
Let’s have a look at the many categories of pensions available for UK residents. The most common one is the workplace pension, which consists of a plan to which both you and your employer will monthly contribute by depositing a minimum amount. The sum you both deposit will progressively build your pension pot. The Government will contribute as well through tax relief.
On the other hand, if you’re an independent worker you can opt for the personal pension, which gives the holder much more freedom when it comes to choosing the amount to put on the fund. By opening this kind of trust you’ll also be able to choose your pension provided and how often to deposit.
Lastly, there’s the state pension, which will give you access to a pre-established amount of money based on your previous contributions. In this case, the retirement age has been set at 66 years old and you will have to prove to have at least 10 years of contributions.
This scheme is available for all women born on or before 5 April 1953 and all men born on or before 5 April 1953: everyone else born after these dates will still be eligible for the New State pension.
How to plan your retirement years
Choosing the right pension fund according to your situation is really important to try to secure a stable economic future. It is also crucial to carefully plan your retirement years in order to get the most out of your choice. To do that, you have to identify your goals, both in life and economic terms. This will be possible by answering some questions, such as:
Where will you want to live during your retirement years?
Will you want to move to a different house or to a different country?
Will your family and children need economic support on your behalf?
Answering these questions may help you create a solid and smart plan tailored for your needs. With the passing of time, your needs might change, but retirement planning is a lifelong process that will help you create your future piece by piece.