Three types of retirement payment in the UK: everything you need to know

Have you thought about retirement? Probably every Monday you dream about the time when you can lie in bed a couple of extra hours, without worrying about anything. But are you ready for this great day, after which you will be completely free?

For some, retirement is a distant future, and for others - a constant struggle for survival, because there is a catastrophically shortage of money. It is necessary to think about a pension from a financial point of view. Here are the main facts.

Pension: what you need to know

There are three main types of pension:

state pension (paid by the government);

non-state, or labor, pension (payments to an employee who retired from the pension fund of the employing organization, formed from deductions according to the pension scheme);

personal, or private, pension (the name speaks for itself).

Labor pensions are of two kinds. Unfortunately, a pension plan with fixed payments (a pension plan for which participants are guaranteed a fixed payment in absolute terms or a share of the average salary for a certain number of years, and contributions are made by employers and sometimes by the employees themselves) is gradually becoming obsolete. The majority has a pension plan with fixed contributions (a pension program in which workers and employers transfer fixed contributions to the pension fund, and the amount of payments to the employee depends on the amount actually transferred to the fund and the income received from investing these funds by the pension fund).

Some people prefer to combine their previous labor pension plans into one or to transfer money to a personal or private pension. If you do that, you are doing the right thing.

Having applied to the management company, ask to explain everything to you as simple as possible and in writing. Ask what commission the company will take. And do not be afraid to admit that you do not understand something.

If you need more information or want to complain, contact Resolver using the form at The Pension Advisory Service (TPAS) offers an excellent website with a wealth of information. If you are approaching retirement age and want to know what options you can expect, contact Pension Wise.

And most importantly, if you have not accumulated enough funds to retire, do not be afraid to say it and get help.

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