Pensions offer generous tax reliefs as an incentive for us to save for our retirement. You can pay money into a pension and receive tax relief up to the value of your earnings, capped at £40,000 per tax year. For example for every £8,000 you contribute to your SIPP, the government pays in £2,000 and if you are a higher or additional rate tax payer you can claim further tax relief through your tax return.
Tyes of Pensions
There are many types of pensions and typically most will accumulate more than one over their working life. Below are some of the difference types of pensions you can use to achieve your retirement goals.
This is provided by the government and is based on your National Insurance contributions. It is paid to you once you reach State Pension age (66, 67, 68 - depending on year of birth).
This is pension scheme which is established by an employer for its employees. There are many different types; Final salary (defined benefit) scheme, Career average pension, Money purchase (defined contribution) scheme, Stakeholder pension, Automatic enrolment scheme.
This is a money purchase pension that can give you more freedom about how you invest the money than you might have in a company scheme. Your employer does not necessarily contribute to a personal pension although it can do so.