Types of pension

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Options for using your pension pot

Following changes introduced in April 2015 you now have more choice and flexibility than ever before over how and when you can take money from your pension pot. Take your time to understand your options, and get help and advice as what you decide now will affect your retirement income for the rest of your life

Taking your whole pension pot as cash

Under rules introduced in April 2015, once you reach the age of 55, you can now take the whole of your pension pot as cash in one go if you wish. However if you do this, you could end up with a large tax bill and run out of money in retirement. Get advice before you commit.

What is a group personal pension?

Group personal pensions (GPPs) are a type of defined contribution pension which some employers offer to their workers. As with other types of defined-contribution scheme, members in a GPP build up a personal pension pot, which they then convert into an income at retirement.

Pensions for the self-employed

If you’re self-employed, saving into a pension can be a more difficult habit to develop than it is for people in employment. There is no-one to choose a pension scheme for you, no employer contributions and irregular income patterns which can all make saving difficult. But preparing for retirement is crucial for you too, so read on to find out where to start.

Defined contribution pension schemes

With a defined contribution pension you build up a pot of money that you can then use to provide an income in retirement. Unlike defined benefit schemes, which promise a specific income, the income you might get from a defined contribution scheme depends on factors including the amount you pay in, the fund’s investment performance and the choices you make at retirement.

Self-invested personal pensions (SIPPs)

A self-invested personal pension (SIPP) is a pension ‘wrapper’ that holds investments until you retire and start to draw a retirement income. It is a type of personal pension and works in a similar way to a standard personal pension. The main difference is that with a SIPP, you have more flexibility with the investments you can choose.

Your first pension – the options

Once you’ve decided to start saving into a pension, you’ll need to choose where to save. There are many different providers to choose from, but your first task will usually be to select the type of pension that’s right for you. In the article below we explain which of these it makes sense to consider first.

Personal pensions

A personal pension is a type of defined contribution pension. You choose the provider and make arrangements for your contributions to be paid. If you haven’t got a workplace pension, getting a personal pension could be a good way of saving for retirement

Stakeholder pensions

Stakeholder pensions are a form of defined contribution personal pension. They have low and flexible minimum contributions, capped charges and a default investment strategy if you don’t want too much choice. Some employers offer them, but you can start one yourself.

NEST pensions

NEST is a low-cost pension you may be able to join through your workplace or if you are self-employed. Once a member, you can carry on saving this way even if you change jobs or stop working.

Multi-employer pension schemes

Since October 2012, a new system of automatic enrolment for workplace pensions is being phased in. This means that by 2018 most workers will automatically be made members of a workplace pension scheme. In many cases, employers will use a multi-employer pension scheme, sometimes call a “master trust”.

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