Types of pension
The government has recognised that millions of people aren’t saving enough for retirement.
They offer generous tax
benefits as an incentive, and there are lots of pension options
available to suit individual circumstances.
However, while the incentives are generous for most people, the government has imposed limits. Each year, there is a cap on the pension contributions made either by you or on your behalf (e.g. by your employer) across all your pensions.
For most people this is currently £40,000 each tax year or 100% of earnings (whichever is lower). The amount is lower for people who fall into the following categories:
- Those with income over £110,000 a year and with ‘adjusted’ earnings’ (income plus pension contributions) of £150,000 or more will see their annual allowance reduced by £1 for each additional £2 earned over £150,000. This continues until the allowance reaches the minimum level of £10,000 for those with adjusted earnings of £210,000 or more.
- When a taxable income is withdrawn from a pension the annual allowance is replaced by the Money Purchase Annual Allowance of £10,000 or 100% of earnings, whichever is the lower amount, and no carry forward contributions can be made.
There is also a cap on the total value of all your pensions, called the Lifetime Allowance. This reduced to £1m on 6 April 2016. Please be aware that tax rules can change and the effects of tax rules on you will depend on your individual circumstances.
To maximise your retirement savings, you might want to contribute to more than one pension. Most people have several, depending on the number of different companies they have worked for. It’s important to understand what you’ve got, how it’s invested and whether it’s performing well.
Here are some of the different types of pensions and investments you can use to achieve your retirement goals:
- State Pension – provided by the government, it is based on National Insurance contributions and is paid to you once you reach State Pension age
- Stakeholder Pensions - usually these pensions are cheaper and more straightforward than personal and company pensions, but it depends on the scheme’s rules. However, they often offer less investment choice
- Company Pensions - set up by employers, these schemes offer a range of benefits and your employer pays in money as well as you
- Personal Pensions - a personal pension plan allows you to build up a fund which is then used to provide a lump sum and income at retirement
- Self Invested Personal Pension (SIPP) - this is a type of personal pension plan which lets you choose from a wider range of investments. SIPPs may best suit experienced investors with the time and experience to manage their own investments.
Pensions we offer
Barclays Stockbrokers has two investment accounts to allow you to manage your pension savings.
- Barclays Stockbrokers SIPP – allows you to open a SIPP and an investment account simultaneously and manage your pension assets with Barclays Stockbrokers