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.