There are a number of different types of pensions to be aware of, here are the three types:

1. State pension

This is a regular income paid by the UK Government to those who have reached the state pension age.

2. Defined benefit pension scheme

(Also known as career average revalued earnings/final salary pension)

• Upon retirement, you will receive a percentage of your income that’s worked out based on your final pensionable salary and years of pensionable service.

3. Defined contribution pension scheme

(Also known as money purchase pensions)

• Build up your own pot of money and the value will fluctuate over the long term, but you’ll still be able to benefit from a number of tax advantages. The income you receive at the end (when you come to retire) will depend on how much it costs to buy a pension at the time.
• There are a number of different personal pensions you can pay into:
  • Workplace pension scheme
  • Trust-based pensions
  • Group personal pensions
  • Stakeholder pensions
  • Self-invested personal pensions (SIPPs)

For further information and advise head to the Money Saving Expert website

To find out more about why you’d need to be thinking about a pension when you’re still so young, click here.