Defined Benefit Pension
A Defined Benefit Pension (DB) pays a retirement income based on your salary and how long you have worked for your employer. Defined benefit pensions include ‘Final Salary’ or ‘Career Average’ pension scheme. DB Pensions are generally only available from Public Sector or older workplace pension schemes. Whilst not impossible, these types of pensions are becoming increasingly more difficult to change jurisdiction.
Defined Contribution Pension
Defined Contribution Pensions (DC) build up a pot to pay you a retirement income, based on contributions from you and/or your employer and investment returns. DC Pensions include workplace and personal pensions, including stakeholder pensions. DC Pensions can be run through an insurance company or master trust provider, or through a bespoke scheme set up by your employer.
Personal Pension Schemes/Personal Pension Plans
A Personal Pension Scheme (PPS), sometimes called a Personal Pension Plan (PPP), is a UK tax-privileged individual investment vehicle, with the primary purpose of building a capital sum to provide retirement benefits, although it will usually also provide death benefits. Both the individual can contribute as well as their employer. Benefits can be taken at any time after age 55 if the plan rules allow, or earlier in the case of ill health. In the past, legislation required benefits to be taken before age 75, and many plans still contain this restriction. Part of the fund (usually 25%) may be taken as a tax-free lump sum at retirement.
Stakeholder Pensions
Stakeholder pension schemes were intended to encourage more long-term saving for retirement, particularly among those on low to moderate earnings. They are required to meet a number of conditions set out in legislation, including a cap on charges, low minimum contributions, and flexibility in relation to stopping and starting contributions. Employers with five or more employees are required to provide access to a stakeholder pension scheme for their employees unless they offer a suitable alternative pension scheme. The features of stakeholder pensions were intended to make them cheaper to sell than existing personal pensions and to provide a more transparent and attractive saving vehicle.
State Pension
A State Pension is a regular payment from the Government that you qualify for when you reach State Pension age. The State Pension age for men and women in the UK is increasing and will reach 66 by 2020. It’s due to rise further to 67 by 2028. The amount you get depends on your National Insurance record and the number of years you have paid into it.
If you have any of the above pensions (except State Pension entitlement) still in the UK and you´re not sure whether it´s best to leave it where it is, contact us now for a no fee, no obligation review.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
The rules relating to pension transfers and inheritance tax could be set to change after HM Revenue & Customs (HMRC) announced that it is to review its guidance on the matter following a number of concerns raised by the Office of Tax Simplification (OTS) in a review published on July 5 2019.