The Complete Pensions FAQ

Q. What are the different types of pension plans?

A. There’s a variety of different pension arrangements that you can choose from. Some of them are State Pension, Private Pension, Workplace or Company Pension, Final Salary Pension, Stakeholder Pension and SIPP.

Q. What is the State Pension?

A. The State Pension is a government initiative that allows every citizen of UK to receive a retirement income once they reach State Pension Age. It is based on the number of qualifying years of National Insurance Contributions made over a person’s working life or the number of years that the person has been credited with, by the government.

Q. How much will I receive as State Pension?

A. The basic state pension payout for the financial year 2015/16 is £115.95 a week for a single person. If you and your spouse or civil partner, both have accumulated NI contributions or credits, then you may be eligible to receive double this amount a week. Additionally, you may also qualify for additional state pension if you were employed. However, from April 2016, the existing state pension slabs will be replaced by a flat rate state pension of £148 a week.

Q. What is a Private Pension Plan?

A. Private or Individual Pension Plans are a private form of tax-efficient retirement saving that you can set up. It is not connected to your workplace pension or your employment status. It gives you greater flexibility over your funds and lets you choose how and where to invest your retirement funds.

Q. What are the types of Private Pension Plans?

A. There are many different types of Private Pension Plans. Some of them are self-invested personal pensions (SIPPs) and group personal pensions (GPPs).

Q. What is an SIPP?

A. Self Invested Personal Plan, or an SIPP is a specialised type of pension plan which gives you greater flexibility on your investments. They can be used to consolidate multiple pension plans and manage them efficiently. An SIPP lets you choose from a gamut of investment options like shares, property and funds. However, since you will be making most of the investment decisions, the associated risk with an SIPP is higher.

Q. What is GPP?

A. GPP or Group Personal Pension is a defined contribution plan that will be set up by your employer and will be run by a pension provider. It will have multiple members who will contribute towards the pension pot which can be converted to an income at the time of your retirement. A GPP usually has a broader choice of investments.

Q. What is an employer/company pension scheme?

A. Employer Pension Scheme is a type of pension scheme set up by companies for their staff. There are two main types of employer pension schemes, final salary and money purchase. Employers are obliged to make contributions towards these pension schemes and hence, they are considered more beneficial than other forms of pension plans.

Q. What is a final salary pension scheme?

A. Final Salary Pension is a type of employer pension plan that is based on the number of years of enrolment in the scheme and your final earnings. The rate of accrual and the benefits which are taken from the pension pot may affect the pension that you receive in this type of plan.

Q. What is a money purchase pension scheme?

A. Money Purchase or Defined Contribution Scheme is a type of employer pension plan in which you make contributions each month towards your pension pot. The amount of contributions made, the annuity rates, returns on your investment and charges applicable at the time when you take benefits from the pot, will determine the amount of pension you receive each month.

Q. Is there a limit to the number of Pension Plans I can invest in?

A. While there are no limits to the number of plans that you can invest in, there may be charges applicable. So, it is recommended that you seek professional financial advice before investing in more than one pension scheme.

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