What are the Different Types of Pension Schemes

Employment-based pension schemes are available through a person's employer. Usually the arrangement sees the employer make a percentage contribution to the employee's pension each pay day. The employee also has the option of making contributions to their employment pension, with many people choosing to match the employer's amount. Unfortunately, due to the state of the economy, companies have had to make cutbacks and employment-based pensions are now less common than they once were. Government and other public service jobs still have pensions available for their employees.

The state pension is available to everyone who has paid a certain amount of national insurance contributions. The age a person can claim their state pension is set by the government. Up until April 2010, this age was 65-years-old for men and 60-years-old for women. However, the changes mean the age a person receives their state pension is now based on a person's birth date. You can not make extra contributions to state pension schemes as a rule, although some people are able to top up their national insurance if they have not paid enough.

Private pension schemes are taken out with various companies, such as specialist firms, banks and insurance companies. The private pension gives a person much more control of what type of pension they receive, when they receive it as well as how much they invest in to it. Many private pension schemes require a minimum investment, which can range from anywhere between £1 and £20,000. A person is than required to make regular payments to their private pension, either in annual lump sums or by making monthly payments.

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