A pension, such as the UK government’s NEST pension, is a means of accumulating cash to make sure that you have income at retirement beyond that you get from the state pension. You can get a pension by building up your own savings, or from an employer.
The income that you get from your pension is a function of how much you save, and how what you saved was invested. It is all determined by the size of your pension pot at the time you retire, and an annuity is then paid based on this pot. One alternative style pension is where you are paid based on how many years you have worked for your employer, and what your salary is at the time you stop employment.
One of the main benefits of any pension is the tax cover that it provides. You can get tax relief on the money that you pay into the pension, and when money is paid out it can also be tax free – most commonly when you get a tax free lump sum when you reach pensionable age.
A pension is often thought of as the ultimate retirement plan for most folks. You could just manage your own money, or rely on the government pension, but these methods are seen as a more risky approach to saving.
Pensions grow to be such sizeable pots because of the tax advantages. By compounding tax free savings the amounts held can accumulate into a big enough lump sum for you to effectively live off the interest.
The occupational pension, the money purchase pension and the state pension are the three main options that you have as an investor looking to save for your retirement. Occupational pensions are often called “final salary” pensions. The money purchase pension can be from your employer or be used by people who are self-employed.
The UK government’s NEST pension is not a ordinary pension scheme. It is targeted at lower income employees and more details about it can be found at this web site, just click: http://nestpensionguide.co.uk/
