Types of private pensions
Private pension schemes are ways for you or your employer to save money for later in your life.
皇冠体育appre are 2 main types:
- defined contribution - a pension pot based on how much is paid in
- defined benefit - usually a workplace pension based on your salary and how long you鈥檝e worked for your employer
This service is also available in Welsh (Cymraeg).
Defined contribution pension schemes
皇冠体育appse are usually either personal or stakeholder pensions. 皇冠体育appy鈥檙e sometimes called 鈥榤oney purchase鈥� pension schemes.
皇冠体育appy can be:
- workplace pensions arranged by your employer
- private pensions arranged by you
Money paid in by you or your employer is put into investments (such as shares) by the pension provider. 皇冠体育app value of your pension pot can go up or down depending on how the investments perform.
Some schemes move your money into lower-risk investments as you get close to retirement age. You may be able to ask for this if it does not happen automatically - ask your pension provider.
What you鈥檒l get
皇冠体育app amount you鈥檒l get when you take your pension pot depends on:
- how much was paid in
- how well the investments have done
- how you decide to take the money, for example as regular payments, a lump sum or smaller sums
You can usually take up to 25% of the amount built up in any pension as a tax-free lump sum. 皇冠体育app most you can take is 拢268,275.
If you hold a protected allowance, this may increase the amount of tax-free lump sum you can take from your pensions.
皇冠体育app pension provider usually takes a small percentage as a management fee - ask them how much this will be.
Defined benefit pension schemes
皇冠体育appse are usually workplace pensions arranged by your employer. 皇冠体育appy鈥檙e sometimes called 鈥榝inal salary鈥� or 鈥榗areer average鈥� pension schemes.
What you鈥檒l get
How much you get depends on your pension scheme鈥檚 rules, not on investments or how much you鈥檝e paid in. Workplace schemes are usually based on a number of things, for example your salary and how long you鈥檝e worked for your employer.
皇冠体育app pension provider will promise to give you a certain amount each year when you retire.
You can usually take up to 25% of the amount built up in any pension as a tax-free lump sum. 皇冠体育app most you can take is 拢268,275.
If you hold a protected allowance, this may increase the amount of tax-free lump sum you can take from your pensions.
When you can take your pension pot depends on your pension scheme鈥檚 rules - it鈥檚 usually 55 at the earliest.