Understanding UK Pensions

UK Pension Types

Defined Contribution

Members and their employers typically contribute a percentage of the members salary into a defined contribution scheme where a fund value is held. This fund value is then invested and will rise/fall depending on investment performance as well as further contributions.

Defined Benefit/Final Salary

A final salary scheme is pre-defined in its structure. A structured income for life is provided, with elements such as; age of access, death benefits and benefit escalation also structured by the scheme.

Self-Invested Personal Pensions - SIPP

A SIPP is a flexible pension structured that allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue and Customs. SIPP’s are renowned for being able to provide flexible retirement options.

Small Self-Administered Schemes – SSAS

A SSAS is primarily set up by private and family run businesses for the benefit of the owner directors and family employees. The number of members for a SSAS generally does not exceed 11.

A SSAS can offer particular benefits to business owners including:

• Commercial property can be bought and leased back to your business (or any third party)
• Loans can be advanced to your business.
• Investing in your company via the SSAS by purchasing an equity stake

State Pension

To get the basic State Pension you must have paid or been credited with National Insurance contributions.

The basic State Pension increases every year by the ‘triple-lock’ or whichever is the highest of the following:

• earnings - the average percentage growth in wages (in Great Britain)
• prices - the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI)
• 2.5%

If you are unsure what pension you have in the UK and would like to understand the scheme and the options available, please get in touch with me for a review.