Search

Plan A Secure Retirement: The 1 minute guide to pensions - Part 1

by Trevor Goodbun

Confused about pensions? Then join the club, after over 30 years I am still learning something new every day, but the basics are simple, honest!

Nearly every type of pension falls into one of two camps, defined contribution or defined benefit.

Final Salary pensions are the best known example of a defined benefit scheme and the amount of pension you will receive will depend on three things

• Your salary.
• The years you are a member of the scheme.
• The schemes accrual rate.

Don’t be put of by the last expression it simply refers to how much pension you will receive for each year you are a member. So if you are a member of a final salary scheme for 20 years with a 1/60 accrual rate and your final salary was £30,000 you would receive a pension of £15,000 a year,

£30,000 x 20 = £15,000
60

The scheme is then obliged to pay you that pension for life no matter what the cost.

Most private sector schemes allow you to exchange some of that income for a lump sum, most public sector schemes provide a separate lump sum that can be exchanged for a pension.



<< Back to home
No books are available for this article.

Related Articles

Plan A Secure Retirement: It’s not all over Many years ago on Sunday afternoons I used to sneak next door and watch the Big Match in Uncle Jack’s house (they had a colour telly we didn’t!). Back then matches seemed to be played on energy sapping muddy pitches followed by a short period of extra time.
Plan A Secure Retirement: It’s not the wrapper, it’s what’s in it that counts Which of the following do you think is the riskiest investment?

• A stocks and Shares ISA
• An Unit Trust
• A Pension
• An Investment Bond

Answer; they are all the same.
Plan A Secure Retirement: No Risk – No Such Thing Would you be attracted to a risk free investment that guarantees a higher return than a deposit account? Not vast by amount but just enough to make it worthwhile.
Plan A Secure Retirement: How to lose a fortune when taking your pension You can lose a fortune on your pension? No surprise there then, you only have to watch a money programme on the telly to be confronted with tales of people who have been consigned to a lifetime of poverty because of their pension hasn’t performed.
Plan A Secure Retirement: 1 Minute guide to pensions – Part 2 In the first part of the 1 minute guide to pensions we covered defined benefit pensions. In this we will explain defined contribution pension which include personal pensions.
Plan A Secure Retirement: What choices do you have when you take your pension? When you come to take your pension you will be faced with a number of choices about how your pension will be paid. As these will stay with you for the rest of your life and will be virtually impossible to reverse them it pays to consider them closely.
Plan A Secure Retirement: Why do older people pay too much tax? An official government report estimated that between 2002 and 2009, 1.5 million people over state retirement age paid £250 million more tax than they needed to.
Plan A Secure Retirement: 10 tips to get the most from your deposit account With interest rates at an all time low, you need to get the best possible rate on your deposit accounts.
Plan A Secure Retirement: Is Equity Release a con? Equity release can be a great way of improving your standard of living, especially in the later years of retirement. Unfortunately it suffers from a poor reputation. There are several reasons for this, not least when the product was first introduced over 20 years ago it often represented poor value, with interest payments sometimes exceeding the income it generated and people could die owing more than the value of their home.
Get Started In Pig Keeping: Pig breeds In the UK pig breeds can be divided into either native or commercial breeds. Native breeds tend to be fewer in number and are usually kept and fed naturally in an outdoor environment by smaller farmers, or those who want to know where their food comes from and how the pig is fed - the ‘self sufficient’ route. Commercial breeds are often imported and/or genetically cross bred to meet the supermarket demand for faster growing pigs.
Get Started In Pig Keeping: Pig courses It is sensible to attend a course on keeping pigs before you start or as soon as you can. It will make you a better pig keeper and undoubtedly save you money in the long run,
Get Started In Pig Keeping: Pig breeders It is important to buy pigs (or piglets) from a recognised breeder, doing so ensure s that the pigs are healthy and meet all breeding standards. Furthermore, dealing with recognised breeders guarantees that you will have someone to refer to if and when you require assistance.
Get Started In Pig Keeping: Pig health Pigs are usually very healthy animals and provided they are kept and fed correctly they rarely become ill. If your pig becomes ill or shows signs of sickness call your vet immediately because the longer you leave things the worse it can become.
Get Started In Pig Keeping: Traditional pig keeping Unlike commercial ‘factory farming’ where animals are cooped up inside traditional pig keeping offers pigs the chance to live naturally. Pigs are animals that give rather than take and in return for sacrificing a small area of land the pig keeper is rewarded with a lifestyle that keeps the stresses and strains of modern day living at bay.
Get Started In Pig Keeping: Piglets Adorable, fascinating, lovable, enchanting, amusing and captivating are just a very few of the adjectives used to describe piglets . There is hardly ever a bad word said about them although the phrase ‘time wasters’ does occasionally spring to mind.
Get Started In Pig Keeping: Pig equipment If you are an equipment freak then you are going to be sadly disappointed if you become a pig keeper. Luckily to become a successful pig keeper you do not have to spend a great deal of money on equipment.
Get Started In Pig Keeping: Books on keeping pigs Picking a specialist book on any topic is a daunting prospect. Although written specifically for pig keeping these simple rules can be adapted to any situation when in doubt.
Get Started In Pig Keeping: Rare breed pigs Rare Breed pigs provide a link to the past and a source of hope for the future. The difference between keeping Rare Breed and Commercial pigs is vast . Not only are they easier to keep, with a temperament that encourages you to do something to save them, but they also produce meat that will make you think the future is bright after all.
Get Started In Pig Keeping: Showing pigs Before showing your pig it is important to know what is required of him. Before you enter the ring there is a lot of work to be done but any effort you put in will be wasted if you have the wrong pig or if he does not meet the required breed standards.
Sort Out Your Family Finances: Budgeting If you only have time to do one thing relating to your finances then do a budget plan. A budget plan is a way of recording all of your expenses and all of your income over a fixed period of time, usually a month. You can create a budget plan on paper or set it up on a spreadsheet if you are that way inclined.
Sort Out Your Family Finances: Children and students According to recent statistics each child will cost approximately £180,000 to bring up. For the same money you could buy a typical 3-bed family home in Leicester or ‘his and hers’ Aston Martin DB9s. That aside, we all know our children are worth every penny which is why we try to provide for them financially from the day they are born.
Sort Out Your Family Finances: Borrowing money Attitudes to borrowing money have changed over the years. It is virtually impossible to go through life without having to borrow money. For example, most of us need a mortgage to be able to buy a house. Other ‘large ticket’ items such as cars might only be accessible with the aid of a loan.
Sort Out Your Family Finances: Savings and investments People save for different reasons. Some savings plans are short-term perhaps to pay for a big purchase like a holiday or wedding. Other people have long-term savings plans either for a ‘rainy day’ or for their retirement.
Sort Out Your Family Finances: Household expenses Examining the household expenses can be quite depressing. For many households it would not be uncommon for well over half the family income to go on the mortgage, council tax and utility bills. Younger people tend to be on lower incomes at the start of their careers so the proportion that they spend on keeping up the house can be higher. You would expect this to drop as the years progress and income increases.
Sort Out Your Family Finances: Plan A Secure Retirement: Insurance The principle of insurance is quite simple. You pay relatively small amount of money up front (a premium) so that you can claim a larger amount of money later if something goes wrong. You can insure almost anything but typically it will be your car, house, possessions, health, pets or yourself.
Sort Out Your Family Finances: Banking The banks are not the nation’s favourite institutions at the moment. To be fair to them if you pay your wages in every month and stay in credit you can currently enjoy all the services they have to offer for free. This means access to internet banking and 24-hour cash machines on top of having somewhere safe to store your money.
Sort Out Your Family Finances: Tax, NI and benefits Income tax for most people is 20% of income. This is deducted from your pay at source from your wages and the amount will be detailed on your payslip. If you are on a low income of less than around £6500 you do not pay any tax and if you are on a high income (anything over about £38,000) the tax goes up to 40%. On top of this you will also pay national insurance contributions , which are mainly used to pay for your state pension. This means that anywhere between 30-50% of your salary may disappear in tax and national insurance before you even get your hands on it.
Sort Out Your Family Finances: Buying financial products and services We know that buying insurance is not as much fun as clothes shopping or buying a new car, but it can be just as important. There is a tendency to make quick decisions about what financial products we buy because it’s just too boring and confusing to read all the small print. However, taking the time and effort when buying a new financial product could be time well spent.
Sort Out Your Family Finances: Dealing with debt Debt is not necessarily a bad thing. For example, many people aspire to get a mortgage so that they can get on the housing ladder. This is a debt, but is seen as a necessary one and it should make you better off in the long run.
Site produced by MMT Digital