A Basic Guide to Pensions in the United Kingdom
For many people, the topic of pensions in the United Kingdom can be confusing. There are several different types of UK pensions, and each is unique in terms of the amount that the individual receives upon retirement, how much they pay each month, and a number of other factors.
The main types of UK pensions are:
These are pensions are paid by the state and are based upon contribution figures of people that work in the UK in order to prevent poverty during retirement age. It’s interesting to note that until recently, beggars and those who suffered poverty were seen as criminals in the United Kingdom and were imprisoned if caught begging. Up until the 20th century, the Vagabonds and Beggars Act 1495 allowed for the imprisonment of vagrants. However, the more modern Old Age Pensions Act 1908 brought a more compassionate view to poverty.
In 2011, the Pension Act amended various things, including the age of eligibility for receiving state pension.
Note that there are additional sub-divisions to the UK state pension, which are additional pensions and pensions credits.
In the United Kingdom, occupational pension plans are often paid by both the employee and employer, and this arrangement is known as joint funding. However, non-contributory occupational pension schemes also exist.
In contrast to the past method of using defined benefit schemes, many employers now rather offer defined contribution or money purchase schemes. What this means is that, rather than a pension amount that largely depended on factors such as the length of employment with the employer, monthly occupational pension amounts are now paid into a fund and upon retirement, the employee may buy a pension fund with the accumulated funds.
This is the kind of scheme where people deal with a financial services provider directly and pay into a scheme each month, and similarly to occupational pensions, the individual may purchase a pension upon retirement. However, note that this is a very basic definition of individual pensions, and that there are different types of personal plans, such as stakeholder and group pensions, and SIPPS.
For world-class financial services, contact Carrick Wealth, the experts in retirement and pension planning, fiduciary and estate planning, and investment services. Furthermore, we specialise in helping individuals receive their hard-earned UK pensions, no matter where in the world they wish to retire.