Get a Private Pension and Ensure a Secured Future
Private pension or personal pension is the name given to the private individual plans that you can pay yourself. The private pension scheme is a tax-privileged individual savings plan in UK, which is formulated to build a capital sum for providing retirement benefits.
The personal or private pension plans were initially introduced in 1987 for replacing the retirement annuity plans.
Why do you need a private pension?
A private pension will be necessary as the government pension is unlikely to provide you comfortable living after retirement. The state pension only offers the basic support, but you definitely need a private pension to ensure a secure future that provides you a better future to fulfill all your needs.
Though you can save for the future in several ways that are not tax-free, like property investment, savings accounts, and stocks and shares, the private pension schemes appear to be much more tax-efficient.
The major types of private pensions
Stakeholder schemes: The government for offering access to the private pensions established this scheme for the people who have employers operating without any occupational schemes. Here also, you require investing in the stock market, cash savings accounts and bonds that are used for the purchase of an annuity upon retirement. This pension scheme has a low cost, is flexible and easy to understand.
Annuities: The annuity is a fixed amount of money that is paid to a person for the rest of his/her life. Using a hefty amount from your pension fund you purchase the annuity. You invest it in the stock market in a fund that you consider to be safe.
Final Salary: The final salary schemes offer a guaranteed income that is dependant on the salary earned on the final year of your work and the length of your service. The only drawback is that it is quite expensive in maintaining this scheme, but is still by far the best private pension scheme.
Money Purchase: In this private pension scheme, you make payments into a fund that is invested into the stock market. These accumulated funds are used for buying an annuity that will in return provide you regular retirement income. The amount you get after your retirement in this case will depend on the performance of the stock market and is not guaranteed. You must indulge in safe investments in order to reduce the losses.
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