What is a personal pension?
Personal pensions are provided by banks, building societies, insurance companies and unit trusts. You invest a certain amount of money into a personal pension per month or you can invest a lump sum, which your pension provider will then go on to invest on your behalf.
Would a personal pension be right for you?
When considering starting a personal pension fund, you should consider how much you will be able to invest into it and what you might get if you went with another type of pension.
A personal pension might be right for you if you are:
- unemployed but can afford to pay into a pension
- employed but your employer does not have a company pension scheme
- employed and you choose not to pay into your company scheme
- employed but only earn a small wage and you wish to top up the amount of pension you are saving
A personal pension may not be right for you if you are :
- employed and your employer provides a company pension scheme
- employed and your employer offers a stakeholder pension scheme with an employer contribution
Paying your personal pension
You and other people can pay into your pension fund, which means your family can help you save for retirement. If you are on a low wage and you think you will have to vary or stop contributions to your pension fund, you should consider getting a stakeholder pension, which offers a lot of flexibility.
Working out the value of your other pensions
When considering starting a personal pension, you should consider the amount that you will receive from your other pensions. The basic state pension is worked out by the amount of national insurance contributions that you have made. Any additional state pension you may be entitled to is worked out by the amount by your wage as an employee and your national insurance contributions. If you are self-employed you will not be able to build up any additional state pension.
If you are enrolled in a company pension scheme, your employer should be able to tell you how much you are likely to get.
Other elements to consider before getting a personal pension
Before you decide to start a personal pension you should also consider the following;
- what are the rules about contributing
- how much will you save and will it contract you out of any additional state pension
- how will your money be invested?
- what will the pension provider charge you for setting up your pension and any other administrative costs.
How much pension will you receive
Your pension provider should send you a yearly pension forecast which will tell you how much your pension is worth and what you’re likely to receive if you continue to contribute in the same way.
The final value of your pension will depend on how much you have contributed and how well your money is invested. If you have any questions about your pension, you should get in contact with your pension provider.
When can you start to claim your pension
The earliest you can start to claim your pension is 55. As a general rule people tend to wait until they are at least 60 before they start to claim. There are some circumstances where you can claim your pension before you reach 55.
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